Bank Asset Auction: Bids for Silicon Valley Bridge Bank, N.A. (“SVB”) and its subsidiary Silicon Valley Private Bank, together or separately, in whole or in part, are due by Wednesday, March 22, 2023 at 8 p.m. and Friday, March 24, 2023 at 8 p.m. We’ve previously reported that SVB is open for operations for a minimum of ninety days until it is sold or liquidated.

Executive Summary:

The FDIC has statutory obligations to maximize the net present value return from the sale or disposition of the assets entrusted to it as receiver, and to minimize the amount of any loss realized.[1] Today we examine the FDIC’s efforts to fulfill its mandate through the transfer of assets to bridge-banks, Silicon Valley Bank, N.A. (“SVB”) and Signature Bank, N.A. (“SB”).

In the second largest US bank failure since the 2008 global financial crisis, the California Department of Financial Protection and Innovation took over Silicon Valley Bank (“SVB”) on March 10 and appointed the Federal Deposit Insurance Corporation (“FDIC”) as SVB’s receiver. Just two days later, the New York State Department of Financial Services took over another bank, Signature Bank, and appointed the FDIC as receiver. And, yesterday, the share price of various European banks plunged following record one-day selloffs.

After a weekend that saw the tech ecosystem unite to fight for its future, on Monday 13 March 2023, the Bank of England (the Bank) effected the sale of Silicon Valley Bank UK Ltd (SVB UK) to HSBC. It used the resolution powers for stabilising failing banks granted by the Banking Act 2009 which were introduced following the 2008/9 financial crisis.

Resolution powers

Highlights

Counterparties should continue to follow their current contractual obligations

Silicon Valley Bank’s parent company bankruptcy filing will not impact contractual rights

Counterparties should be vigilant and consider alternate financing arrangements

What You Need to Know

• Silicon Valley Bank’s 48-hour collapse sent several Big Law firms into action late last week.

• Morgan Lewis, Wilmer, Wilson Sonsini and Ballard Spahr are among the laws firms that launched task forces and webinars over the weekend.

• Despite some reassurance from the FDIC on Sunday, there are lingering issues that are expected to continue to prevent firms’ clients from conducting business in the normal course.

After a turbulent weekend, the news on Monday morning that HSBC had acquired Silicon Valley Bank UK (SVB UK) caused the UK tech community to breathe a huge sigh of relief.

It was also a very different outcome to the one that seemed destined on Friday when the Bank of England announced it intended to put SVB UK into a bank insolvency procedure.

The FDIC receiverships of Silicon Valley Bank and Signature Bank have caused certain early-stage companies to face potentially crippling near-term liquidity issues. These liquidity issues may result in a company becoming insolvent. Therefore, boards of directors of such companies need to consider their fiduciary duties as well as steps that can be taken to mitigate risks.

Fiduciary duties are typically owed to the company for the benefit of its owners.

This FAQ has been updated to take account of developments through March 15, 2023.