Silicon Valley Bank collapse: US Treasury monitoring a 'few banks very carefully'

The resulting loss started a stock sell-off that saw the bank’s shares plummet by 69 percent in pre-market trading before trading was halted, which further triggered widespread customer withdrawals. SVB had been looking to raise $2.25 billion by issuing fresh shares in order to meet its capital requirement positions.

“There are recent developments that concern a few banks that I'm monitoring very carefully. And when banks experience financial losses, it is and should be a matter of concern,” Yellen, who is the US equivalent of a Finance Minister, said at the hearing.

White House Economic Adviser Bharat Ramamurti, echoed the sentiments of Yeller and said that the Treasury Department was carefully monitoring the SVB situation. “I don’t want to say more than that right now, but I want to assure the viewers that this is something we are on top of,” he told CNBC.

However, SVB’s scramble for funds proved to be unsuccessful as the bank was closed down by California regulators before being put into receivership of the US Federal Deposit Insurance Corporation. The FDIC will now be liquidating the bank’s assets in order to pay back depositors of the bank.

The federal body has said that the bank’s offices will open on Monday with all insured depositors able to withdraw funds at the same time. But with only 11 percent of the bank’s $175 billion in deposits being insured at the end of 2022, according to the FDIC, it is not yet known how much can be recovered for the other customers.

The most optimistic outcome will see the FDIC find another bank willing to merge with FDIC that will be able to meet the folded institutions’ obligation deposits. This will allow uninsured depositors to also have access to their funds. But even as the FDIC prepares to reopen the bank on Monday, no merger deal is on the cards yet, reported Reuters.

Despite the collapse, Yellen, who met officials from the Federal Reserve, the FDIC, and the Office of the Comptroller of the Currency, expressed confidence in the US financial system to respond to the bank's failure. “Secretary Yellen expressed full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient and regulators have effective tools to address this type of event,” a statement from the Treasury Department read

“Our banking system is far more resilient than it was in 2008. We've learned a lot. We've got better tools,” added Cecilia Rouse, Chair of the Council of Economic Advisers to the White House.

SVB is a major lender which has supported numerous ventures. Its collapse has sparked fear in the start-up world as many on Twitter feared it to be a “Lehman moment for the start-up world.”