Implications of SVB's Failure for Depositors

Implications of SVB's Failure for Depositors

Insured Deposits

  • The FDIC will insure deposits up to $250,000 per depositor. Insured deposits will be made available on Monday, March 13.
  • Uninsured depositors will receive a receivership certificate for their uninsured deposits. A receivership certificate permits holders to share proportionately in proceeds as SVB's assets are liquidated.

Lines of Credit and Credit Cards

  • The FDIC has frozen all lines of credit and credit card transactions are being declined.

SVB Loans

  • The FDIC has directed borrowers to continue making payments under existing loan facilities, but companies should meet with lending counsel to discuss any borrower-specific considerations.

Bridge Financing

  • Obtaining short-term financing to cover payroll, for example, can be complicated by subordination and intercreditor issues and delayed by investors' limited access to funds following SVB's closure.
  • Short-term financing using Simple Agreements for Future Equity (SAFEs) that contain restrictions on the use of funds may be a beneficial option.

"Sweep" Accounts

  • If sweep accounts funds are held at a third party financial institution, they should not be subject to the receivership but access to the accounts may be delayed.

Transfer Fraud

  • Many entities will need to open new bank accounts and update wire transfer information, opening the door for bad actors to request fraudulent transfers. Close attention should be given to verifying the validity of new wire instructions particularly at this time.