SVB Collapse: Regulators Are Reportedly Auctioning Failed Bank's Assets for Cash

Regulators who have ruled out a bailout are looking to find money for depositors before markets open on Monday.

It is a race against the clock in which the regulators are engaged to find a solution likely to avoid a panic at the opening of the world markets on Monday morning, March 13.

Time is running out to send the message that the collapse of Silicon Valley Bank, a leading bank in financing startups and small businesses in the San Francisco Bay Area, is contained and will not cause bankruptcy.

The Federal Deposit Insurance Corporation was in the process of selling the assets of SVB on March 12, according to Bloomberg News. The federal agency hopes that it will have found a buyer or buyers during these auctions by Sunday evening at the latest. 

The FDIC is seeking to obtain as much cash as possible to distribute to SVB  depositors on Monday so that they can pay their employees, vendors and suppliers and continue to operate.

The D-day for the payment of wages by many companies is March 15.

The FDIC declined to comment on the auction process.

The federal agency took control of SVB after regulators shut the bank down on March 10. The FDIC is now the manager of $175 billion in customer deposits, including money from several startups and from some of the biggest names in the technology world. SVB also had $209 billion in total assets. 

The regulator created a new entity and indicated that unsecured depositors, that is, customers with more than $250,000 in their accounts, will not, for the moment, have access to their money. More than 95% of the bank's deposits were uninsured as of December, according to regulatory filings. 

This leaves a lot of uncertainty about the ability of many startups to operate in the coming weeks, since their funds are locked up. The FDIC said it will pay uninsured depositors an "advance dividend within the next week." 

Companies with SVB accounts, lines of credit and credit facilities are wondering what this means for them, when they can access their funds, if they will be able to get all their funds out, and whether they will have access to their credit lines. 

'We're Very Aware of the Problems'

Treasury Secretary Janet Yellen said on March 12 there were several options on the table.

"I simply want to say that we're very aware of the problems that depositors will have," Yellen said in an interview with CBS's 'Face the Nation'. "Many of them are small businesses that employ people across the country and of course this is a significant concern and working with regulators to try to address these concerns."

Asked whether regulators might be open to a "foreign bank" buying SVB, Yellen responded, "I'm sure they're considering a wide range of available options that include acquisitions."

"This is really a decision for the FDIC, as it decides on what the best course is to resolve this firm,” Yellen said.

Yellen, however, dismissed the idea of ​​a bailout.

"Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out," Yellen told CBS's "Face the Nation." "And we're certainly not looking - and the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and we're focused on trying to meet their needs.”