Silicon Valley Bank: Regulators take over as failure raises fears.

US regulators have shut down Silicon Valley Bank (SVB) and taken control of its customer deposits in the largest failure of a US bank since 2008.

The moves came as the firm, a major technology lender, was scrambling to raise funds to cover a loss from the sale of assets impacted by higher interest rates.

Its problems prompted a rush of customer withdrawals and raised concerns about the banking sector's health.

Officials said they acted to "protect insured depositors".

Silicon Valley Bank had "inadequate liquidity and insolvency," according to banking regulators in California, where the company is headquartered.

The Federal Deposit Insurance Corporation (FDIC), which typically insures deposits up to $250,000, said it had taken charge of the bank's roughly $175 billion (£145 billion) in deposits, the 16th largest in the US.

Bank offices would reopen, and clients with insured deposits would be able to access funds "no later than Monday morning," it said, adding that proceeds from the sale of the bank's assets would be distributed to uninsured depositors.

Investor flight

With many of the firm's customers in this situation, many businesses with money in the bank are concerned about their future.

"I'm on my way to the branch right now to get my money. I attempted to transfer it out yesterday, but it did not work. You know those times when you think you're screwed but aren't sure? This is one of those instances "According to one founder of a start-up, the BBC.

Another healthcare startup founder stated: "We just hit a million dollars in our bank account three days ago... Then something like this happens."

He was able to wire the funds to a different account 40 minutes before the deadline. "It was still pending. Then it appeared this morning. But I know other people who did the same thing seconds after me and it didn't transfer."

"It was a bizarre situation," he admitted.

Regulator response

The collapse occurred after SVB announced that it was attempting to raise $2.25 billion (£1.9 billion) to cover a loss caused by the sale of assets, primarily US government bonds, that had been impacted by higher interest rates.

Investors and customers fled the bank as a result of the news. On Thursday, stocks experienced their biggest one-day drop on record, plunging more than 60%, and fell further in after-hours sales before trading was halted.

Concerns that other banks may face similar problems prompted widespread selling of bank shares worldwide on Thursday and early Friday.

Speaking in Washington on Friday, US Treasury Secretary Janet Yellen said she was keeping a close eye on "recent developments" at Silicon Valley Bank and others.

She later met with top banking regulators, where she expressed "full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient," according to the Treasury Department.

SVB did not respond to a comment request.

The company is a critical lender for early-stage businesses, and it is the banking partner for nearly half of the US venture-backed technology and healthcare companies that went public last year.

The company, which began as a California bank in 1983, has grown rapidly over the last decade. It now employs over 8,500 people worldwide, with the majority of its operations based in the United States.

However, the bank has been under pressure as higher interest rates make it more difficult for start-ups to raise funds through private fundraising or share sales, and more clients withdrew deposits, a trend that has accelerated this week.

The repercussions of the collapse were felt widely in Silicon Valley, as companies grappled with questions about what the collapse meant for their finances.

Customers of Rippling, a firm that handles payroll software and had used SVB, were among those who were impacted. It warned that current payments might be delayed and announced that it was shifting its business to another bank.

SVB's UK subsidiary announced that it will go bankrupt on Sunday evening.

The Bank of England announced that Silicon Valley Bank UK would cease making payments and accepting deposits in the interim, allowing individual depositors to receive up to £85,000 from the UK's deposit insurance scheme.

"SVBUK has a limited presence in the UK and no critical financial system functions," the BoE added.

The collapse of SVB has raised concerns about the wider risks facing banks, as rapid increases in interest rates hit bond markets, in addition to being a major blow to the tech industry.

Central banks around the world, including the US Federal Reserve and the Bank of England, have raised borrowing costs dramatically in the last year in an effort to contain inflation.

However, as interest rates rise, the value of existing bond portfolios typically falls.

Because of these drops, many banks are sitting on significant potential losses, though the change in value would not normally be a problem unless other pressures forced the firms to sell their holdings.

On Friday, shares in some major US banks recovered, but the sell-off continued to hammer smaller firms, forcing trading halts at names like Signature Bank and others.

The tech-heavy Nasdaq fell 1.7% on the day, while the S&P 500 fell 1.4% and the Dow fell 1%.

Major European and Asian indices finished lower as well, with the FTSE 100 down 1.6%.

According to Alexander Yokum, equity research analyst at CFRA, banks that specialize in a single industry are vulnerable to rapid withdrawals such as the one that hit SVB.

"If they hadn't run out of cash to give back to their customers, Silicon Valley Bank would not have lost money," he said. "The problem was that people wanted money and didn't have it - they had it invested, and those investments were performing poorly."

"I understand there is a lot of fear, but it is definitely company-specific," he explained.

"The average Joe should be fine," he added, but tech firms will likely find it even more difficult to raise funds. "It's not good," he admitted.