The latest on the Silicon Valley Bank collapse
By Aditi Sangal, Nicole Goodkind, Lucy Bayly and Elise Hammond, CNN
Do you have questions about the Silicon Valley Bank collapse?
From CNN staff
CEO of Silicon Valley Bridge Bank asks customers to redeposit their funds
From CNN's Krystal Hur
Newly appointed Silicon Valley Bridge Bank CEO Tim Mayopoulos asked customers to return some their funds into the bank.
"If you, your portfolio companies, or your firm moved funds within the past week, please consider moving some of them back as part of a secure deposit diversification strategy. We are also open for business for any new customers. We are actively opening new accounts of all sizes and making new loans," he wrote.
Mayopoulous replaced former CEO Greg Becker on Monday following the bank's collapse that triggered widespread concerns about how the tumult could spread to other regional banks. Customers rushed to yank their money out of the bank after Becker and his team revealed a bid to raise $2.25 billion in capital as well as $21 billion in asset sales last week, sparking anger among employees and helping pave the way for SVB's downfall.
The CEO also reassured customers that dispositors have access to their funds and that all deposits are protected by the FDIC, echoing his message from the day before. "
We recognize the past few days have been an extremely challenging time, and we are grateful for your patience," he wrote.
Some context: The FDIC created the SVB bridge bank to handle customers’ transferred deposits and banking services.
Federal investigations into fall of Silicon Valley Bank are in preliminary stages
From CNN's Phil Mattingly
The Securities and Exchange Commission and the Justice Department are both in the early stages of their investigations into the collapse of Silicon Valley Bank, according to sources familiar with the matter.
Both federal agencies are looking into the bank’s failure and the actions by senior executives in the lead-up to the decision by federal regulators to shutter the lender last week, one of the sources said.
No one has been accused of any wrongdoing and the person familiar with the matter noted that investigations into a significant event like the failure of Silicon Valley Bank are common in the immediate aftermath.
SEC Chair Gary Gensler, while declining to identify any specific institution, appeared to allude to the likely step in a statement on Sunday.
“Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws,” Gensler said in the statement.
CNN previously reported the Justice Department probe.
CNN's Paula Reid contributed to this report.
Stocks close higher as investors digest bank news and look ahead to more economic data
US stocks closed higher on Tuesday, recovering some of their losses after the collapse of three banks tested markets on Monday.
While most bank stocks rallied Tuesday, the smoke hasn't cleared just yet: Moody's Investors Service slashed its outlook for the US banking sector and placed six US banks on review for potential credit rating downgrades.
Traders cheered the lack of surprises in the February Consumer Price Index inflation reading and looked ahead to Wednesday's Producer Price Index, which economists say could show a slowing in wholesale prices. Ahead of the Federal Reserve's policy meeting next week, investors are keeping a close watch for any signs that inflation is cooling.
February retail sales data is also on deck Wednesday morning, along with a homebuilders survey that should give some insight into the health of the housing market.
The Dow closed up 335 points, or 1.1%, on Tuesday.
The S&P 500 rose 1.7%.
The Nasdaq Composite gained 2.1%.
Congress will look into collapse of Silicon Valley Bank, Senate majority leader says
From CNN's Ali Zaslav
Senate Majority Leader Chuck Schumer said on Tuesday that the US banking system is stable thanks to swift action by the Biden administration, the Federal Reserve and the Federal Deposit Insurance Corporation.
“If the damage had spread across our financial system, the deposits and savings of tens of millions of families and small businesses could have been at serious risk,” Schumer said in remarks on the Senate floor.
He added that in the weeks ahead, Congress will look closely into what caused the collapse of the Silicon Valley Bank and “how we can prevent similar events in the future.��
Moody's downgrades outlook for the entire US banking sector
From CNN's David Goldman
Moody's Investors Service cut its outlook for the entire US banking sector Tuesday after placing six US banks on review for potential credit rating downgrades, in the wake of last week's collapse of Silicon Valley Bank.
The credit ratings firm said it expects more banks will be will come under pressure after SVB's failure — particularly those with large hoards of uninsured deposits and long-term Treasury bonds that have crumbled in value. Moody's said it expects pressure on the banking sector to persist as the Fed continues to hike interest rates to combat inflation.
Another concern: US banks are raising the interest rates they pay on savings accounts. Although they hope the higher rates will retain customers worried by the collapse of SVB, that could also eat into profits, Moody's warned.
The good news, Moody's said, is that America's banking system is generally healthy. It has enough cash and liquid assets to withstand an economic downturn. The bad news, for banks anyway, is that US regulators may require them to hold more capital after SVB's rapid failure.
SVB was brought down by a bank run, but its exposure to long-term Treasuries that tumbled in value during the Fed's historic rate-hike campaign aggravated its liquidity problem. Moody's predicts the newly "stressed operating environment" for banks could lead some to lend less, buy back fewer shares or cut dividends to preserve capital in case of emergency.
DOJ and SEC are conducting separate investigations into the SVB collapse, Wall Street Journal reports
From CNN's Aditi Sangal
The US Justice Department is investigating the collapse of Silicon Valley Bank, according to a source familiar with the matter. The Securities and Exchange Commission is also looking into what happened, according to a Wall Street Journal report on Tuesday.
The two major federal agencies are conducting separate probes, which are in their preliminary phases and may not lead to any charges or allegations of wrongdoings, the Journal reported. These probes are commonplace following a big loss, and are reportedly focused on the bank's collapse and stock sales that financial officers made days before the failure.
The DOJ and SEC did not immediately respond to CNN's requests for comment.
In an extraordinary action to restore confidence in America’s banking system, the Biden administration on Sunday guaranteed that customers of the failed Silicon Valley Bank will have access to all their money starting Monday. By guaranteeing all deposits – even the uninsured money that customers kept with the failed banks – the government aimed to prevent more bank runs and to help companies that deposited large sums with the banks to continue to make payroll and fund their operations.
That didn’t stop tremors from the collapse impacting markets around the world. However, US stocks surged Tuesday as bank stocks rebounded. The moment of crisis may be over, but the bank sector and the economy remain on a knife’s edge.
CNN's Paula Reid contributed reporting to this post.
You may have heard the term "bank run" a lot. Here's what it means
Bank runs happen when customers panic and everyone tries to get their money out at once. CNN's Christine Romans explains that's what happened at Silicon Valley Bank, leading to the second-biggest bank failure in US history.
SVB collapse was driven by "the first Twitter fueled bank run," House Financial Services chair says
From CNN's Jennifer Korn
The massive amount of customer withdrawals that led to the collapse of Silicon Valley Bank had all the hallmarks of an old-fashioned bank run, but with a new twist befitting the primary industry the bank served: much of it unfolded online.
Customers withdrew $42 billion in a single day last week from Silicon Valley Bank, leaving the bank with $1 billion in negative cash balance, the company said in a regulatory filing. The staggering withdrawals unfolded at a speed enabled by digital banking and were likely fueled in part by viral panic spreading on social media platforms and, reportedly, in private chat groups.
In the day leading up to the bank's collapse, multiple prominent venture capitalists took to Twitter in particular and used their large platforms to raise alarms about the situation, sometimes typing in all caps. Some investors urged startups to rethink where they kept their cash. Founders and CEOs then shared tweets about the concerning situation at the bank in private Slack channels, according to The Wall Street Journal.
On the other side of a screen, startup leaders raced to withdraw funds online — so many, in fact, that some told CNN the online system appeared to go down. Still, the end result was a modern race to withdraw funds, which House Financial Services Chair Patrick McHenry later described in a statement as " the first Twitter fueled bank run."
"Even back in the ancient days, way before we had any form of modern communication, this stuff tended to be rumors that moved really fast. The reason it would happen is people would walk down the street and observe people standing outside of banks," Andrew Metrick, Janet L. Yellen Professor of Finance and Management at the Yale School of Management, told CNN. "Now we don't have that, but we have Twitter."
The experience of the bank run was also far removed from prior eras when a large number of customers would physically show up at a bank to withdraw funds (though some did line up outside Silicon Valley Bank locations, too.) Now, many could do so online or through mobile devices.
"What made the Silicon Valley Bank run unique was (1) the ease with which its customers could execute withdrawals and (2) the speed with which news of Silicon Valley Bank's impending demise spread," Ben Thompson, an analyst who tracks the tech industry, wrote in a post on Monday. "It was the speed, fueled by zero distribution costs for both rumors and withdrawals, that was so destabilizing."