Silicon Valley Bank has been reopened as Silicon Valley Bridge Bank after being taken over by the Federal Deposit Insurance Corporation (FDIC) last Friday to protect its depositors. To take the reins of the new ‘bridge bank,’ the FDIC has appointed Tim Mayopoulos as the interim CEO.
A bridge bank, according to Investopedia, is an institution authorized by a national regulator or central bank that is “charged with holding the assets and liabilities of the failed bank until the bank becomes solvent again — either through acquisition by another entity or through liquidation.”
The Department of Treasury, the Federal Reserve, and the FDIC made a joint announcement on Sunday that the FDIC will complete its resolution of SVB “in a manner that fully protects all depositors,” and that depositors will have access to all their funds beginning Monday.
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The controversial measure, which the statement was careful to emphasize would not bear any losses to the taxpayer, was made to stem fears of a bank run contagion and economic collapse.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system. This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the three agencies wrote.
And in his first days as the new bridge bank’s CEO, Mayopoulos wasted no time urging venture capitalists that there “is not a single safer place” for their deposits than the new SVB.
“The number one thing you can do to support the future of this institution is to help us rebuild our deposit base, both by leaving deposits with Silicon Valley Bridge Bank and transferring back deposits that left over the last several days,” he said in an update on Tuesday.
The new CEO also underscored in this update that both existing and new deposits are fully protected by the FDIC — the $250,000 statutory maximum limit notwithstanding
And while many are still reeling from last week’s events, the message has been received by a good number of clients. A group of VC firms expressed their support on Twitter following the updates.
Villi Iltchev, a partner at Two Sigma Ventures, said on Tuesday that he’s “personally sticking with SVB,” echoing Mayopoulos’s “safest bank” narrative.
Mayopoulos comes to the role “with experience in similar situations,” as he says. He had been part of the new leadership team that joined Fannie Mae in the wake of the financial crisis in 2008 and served as CEO of the company from 2012 to 2018. Until recently, he was the president of a Silicon Valley-based software company that provides technology to financial institutions to serve their consumer banking customers.
Information for this briefing was found via Time, CNN, Twitter, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
