On March 10, 2023, the California Department of Financial Protection and Innovation (DFPI) closed Silicon Valley Bank (SVB). Upon closure, the DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC created the Deposit Insurance National Bank of Santa Clara, which now holds all deposits previously held by SVB. Deposits were accessible to account holders as of March 13, 2023.

In a joint statement released on March 12, 2023, the Department of the Treasury, FDIC, and Federal Reserve indicated they will make additional funding available to ensure all SVB deposits, both insured and uninsured, will be paid in full. However, the status of SVB’s borrowers remains uncertain. 

In the same joint statement, U.S. government regulators announced a similar systemic risk exception for Signature Bank, New York, New York (SNYB), which was closed by its state chartering authority and relaunched as Signature Bridge Bank, N.A. The FDIC has transferred all deposits and substantially all assets and obligations of SNYB to Signature Bridge Bank, N.A.

Here are some frequently asked questions and responses: 

1.  I had a loan with SVB; do I still have to make my usual payments?

Until the FDIC provides written notice of any updates, borrowers should continue to make payments and perform any other obligations with respect thereto in the same manner as they did prior to the closure of SVB. The FDIC has essentially “stepped into the shoes” of SVB. The FDIC has indicated that payments may be delivered to the same address each borrower previously used. Payments by check should be made payable to “Silicon Valley Bank.” The FDIC will send written notice for any changes in payment instructions and points-of-contact for borrowers.

The FDIC has indicated that it plans to sell SVB’s current loan portfolio. The FDIC will notify you if your loan has been sold and assigned to a new lender.   

2.  What should I do if I become delinquent on loan payments?

If you become delinquent in making your loan payments or can otherwise show financial hardship, you should contact the FDIC to inquire about a loan workout program. A loan workout program proposal can be made in writing and requires you to submit current financial information and other documents requested by the FDIC as part of the proposal. 

In the event a loan modification is not feasible, the FDIC reserves the right to consider a reasonable proposal to settle the debt for less than the amount currently owed. Any loan forgiveness will be reported to the IRS.

3.  What is the status of my letter of credit?

The FDIC has not yet indicated which letters of credits will be assumed and which will be repudiated. If the FDIC determines an obligation required by a letter of credit is “burdensome,” it may elect to repudiate that letter of credit. Given this uncertainty, it may be beneficial for you to obtain a standby letter of credit backing SVB’s obligations as the primary letter of credit issuer. Costs incurred from obtaining a back-to-back standby letter of credit may be included in a claim filed against SVB.

4.  Will I be able to draw on my existing line of credit?

Generally, during a receivership, the FDIC will not continue funding loans. The FDIC states on its website, “[T]he role of receiver generally precludes continuing the lending operations of a failed bank; however, the FDIC will consider advancing funds if it determines an advance is in the best interest of the receivership, such as to protect or enhance collateral, or to ensure maximum recovery to the receivership. In very limited circumstances, the FDIC will consider emergency funding needs required to ensure the short-term viability of a borrower, to protect or enhance collateral value, or for public safety.” On March 10, 2023, the FDIC posited that no drawdowns on current loans and other credit facilities with SVB would be honored under the receivership. Nevertheless, some borrowers have reported that they have been successful in drawing on existing lines of credit with SVB. Until the FDIC provides further clarity, it remains uncertain whether SVB will fund existing lines of credit.

5.  Should I find a new lender or wait to see if my loan is sold?

It may be valuable to identify potential lenders to replace SVB as your lender, regardless of whether your loan is sold. While the FDIC plans to sell SVB’s current loan portfolio, the terms and timeline of such sale remain uncertain.

6.  What is the status of my investment account previously held through SVB?

The FDIC does not insure any nondeposit accounts and investments in other financial products that were held at or through SVB. Under the FDIC’s receivership, the treatment of any money held in nondeposit accounts or other investments will vary depending on the terms and conditions of your underlying agreements with SVB as well as SVB’s agreements with any third-party financial institutions.

In general, if SVB only held assets of your investment account as custodian, you may claim a right to those assets. To have a valid claim, the underlying agreement must have clearly indicated that SVB was only serving as custodian on your behalf. Most notably, money market mutual funds with third-party financial institutions would not be subject to the FDIC’s receivership.

7.  What is the status of my money market account at SVB?

The status of any funds held in a money market account will depend upon whether you maintain a money market deposit account or own shares of a money market mutual fund. For money market deposit accounts, funds deposited remain obligations of the bank, would be subject to the FDIC’s receivership, and would be paid in full. For money market mutual funds, any funds contributed are not considered obligations of SVB and would not be subject to the FDIC’s receivership. If SVB was custodian for your money market mutual fund, you are entitled to those mutual fund shares. However, please note, there may be an extensive delay before a third-party financial institution can grant you access to these mutual fund shares. If you are uncertain whether you have money market mutual fund shares or maintain a money market deposit account, you can confirm this distinction using account statements previously issued to you by SVB. Further, individuals with money market deposit accounts likely have a separate deposit account agreement with SVB.

8.  If my deposits were subject to SVB’s cash sweep programs, can I access my money?

SVB maintained certain cash sweep programs that would regularly “sweep” cash from individual customer deposit accounts to an aggregate SVB account on a daily basis for investment purposes. If you had funds swept in the aggregate to an SVB account, you have the option to withdraw those funds.

9.  How do I submit a claim as an unsecured creditor?

Submit a claim electronically through the FDIC website, by fax, or by mail to 600 N. Pearl St., Suite 700, Dallas, Texas, 75201. Address claims against SVB to the FDIC as Receiver for Silicon Valley Bank. While certain form proofs of claim are currently available on the FDIC website, the FDIC often creates a specific form with respect to each FDIC receivership. Any such form should be made available on the FDIC website once a deadline for claims against SVB is set.

10.  What can my claim include?

If your claim arises in respect of replacing a letter of credit or obtaining a back-to-back letter of credit, you may be able to include in your damages claim costs incurred to obtain the new letter of credit, including associated legal fees.

11.  When do I have to file my claim?

The FDIC has not yet published a filing deadline for claims against SVB. When the FDIC does publish a deadline for claims, by statute, that deadline will not be less than 90 days after the date of that publication.

12.  Will I actually get anything from my claim?

As the FDIC is currently exploring potential buyers for the assets and obligations of SVB, it is unclear how much funding will be available to repay all claims against SVB.

13.  What if I had a loan or lending commitment from SNYB?

The FDIC has transferred all deposits and substantially all assets of SNYB to the newly formed Signature Bridge Bank, N.A., a full-service bank operated by the FDIC until it is sold to a buyer.   

You should continue to make any loan payments according to the terms of your loan agreement with SNYB. You may send payments to the same address to which you have previously delivered payments. Checks should be made payable to “Signature Bank.” The FDIC will notify you of any changes to your payment obligations by mail.