We have received a number of inquiries from clients regarding Silicon Valley Bank’s (SVB) recent shut down by the California Department of Financial Protection and Innovation and the FDIC being named as the receiver. This is a rapidly evolving situation, and we are following the developments closely.

We have identified a number of immediate issues to consider. 

Access to Funds

FDIC has indicated that depositors will have access to their insured deposits (generally a maximum of $250,000 in aggregate) no later than Monday morning, March 13, 2023 and at that time banking activities will resume. The amount of uninsured deposits to be returned to customers will be determined once the FDIC obtains additional information from the bank by the end of next week. Customers will receive a receivership certificate for the remaining amount of their uninsured funds. As per the recommendation of the FDIC, we encourage our clients with accounts in excess of $250,000 to contact the FDIC toll-free at 1-866-799-0959. https://www.fdic.gov/news/press-releases/2023/pr23016.html

Payment of Wages

In the event a company’s payroll account is held at SVB, the company’s ability to make timely payroll may be impaired. Many state and local labor laws and regulations impose strict standards on payment of payroll and may require consideration of furloughs or reductions to avoid violations of unpaid wages, minimum wage and other applicable laws.

Insurance Coverage

Companies should review their existing insurance coverage and engage in discussions with their insurance brokers to determine whether losses they may experience from the shutdown of their banking institution are covered by business interruption or other types of insurance coverage.

Unfunded Commitments and Hedging Obligations

For the short term, SVB will be unable to fund its commitments to extend future credit or to perform its counterparty obligations under swaps and other hedging instruments. In the event SVB is acquired by another bank, the successor bank may assume such obligations, but no assurance can be provided at this stage.

Intermediate Funding

Companies may need to seek short term or bridge funding to meet existing obligations. Companies with secured financing will need to review their financing documents in order to determine how best to access future liquidity.

Letters of Credit

Tenants who have delivered SVB letters of credit to their landlords as security deposits may be required by their landlords to post new letters of credit from a different bank to meet security deposit obligations.

We will be monitoring the situation closely as additional news becomes available and have established a resource page to share timely guidance.