After a tumultuous few days, Silicon Valley Bridge Bank, N.A. and Signature Bridge Bank, N.A. are open to deposit and loan customers.

Early on Friday, March 10, 2023, bank regulators closed Silicon Valley Bank, the preeminent bank for technology companies, and placed the bank into federal receivership. The Federal Deposit Insurance Corporation (FDIC) took control of the bank's deposits (over $175 billion at year end). The following Sunday, regulators took similar actions at Signature Bank (with over $80 billion of deposits at year end). Days of significant deposit withdrawals over fears of bank illiquidity preceded the closures, prompting the dramatic regulatory actions.

Many bank customers were reportedly concerned that blocked access to funds at the closed banks, whether from their deposit accounts or lines of credit, would result in missed payroll and vendor payments, and their own financial distress. Further, only a small percentage of the failed banks' deposits were under the $250,000 deposit cap insured by the FDIC.

A flurry of regulatory action, and fear of financial contagion across the banking industry, resulted in an equally dramatic re-opening of the closed banks as bridge banks chartered by the Office of the Comptroller of the Currency. These "bridge banks" provide full-service banking, including extending new lines of credit, while regulators oversee the institutions.

Key information that customers need to know:

  • All deposits and substantially all of the assets, including the loan portfolios, of the closed banks have been transferred to their bridge banks.
  • All deposits will be available to customers (including above the $250,000 FDIC insured cap).
  • The bridge banks are accepting new deposits.
  • The bridge banks have authority to extend new lines of credit to existing and new customers.
  • All banking products and services will be provided by the bridge banks.
  • The bridge banks will fund loans under their existing and new lines of credit.
  • The bridge banks will provide agency services under their existing and new syndicated loan agreements.
  • Borrowers with lines of credit with the closed banks should continue to make all principal, interest, and other payments to the bridge banks.
  • Vendors and service providers to the closed banks should continue providing services to the bridge banks under contracts with the closed banks.
  • Sale of one or both bridge banks is possible.

We are pleased that the re-opening of business allows access to funds and banking services for our many clients impacted over the past few days. We will continue to monitor SVB, Signature and other distressed banks. Please reach out to us if you have any questions.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved