The Office of the Superintendent of Financial Institutions (OSFI) has taken control of Silicon Valley Bank’s (SIVB) Canadian branch and said it will seek to wind up the operation following the collapse of the U.S. lender.
OSFI, which is Canada’s national banking regulator, said it seized control of Silicon Valley Bank’s Canadian assets after U.S. regulators shut down the California-based lender on March 10 in what has become the second biggest bank failure in U.S. history.
Silicon Valley Bank opened a small office in Toronto in 2019. At the end of last year, the Santa Clara, California-based bank’s Canadian unit had $864 million ($627 million U.S.) in assets, including $435 million in secured loans, according to regulatory filings.
OSFI said it wanted to take control of those assets to help secure and preserve the money owed to creditors and to assist U.S. regulators in their efforts to ensure individuals and organizations have access to their bank deposits.
“By taking temporary control of the Canadian branch of Silicon Valley Bank, we are acting to protect the rights and interests of the branch’s creditors,” said OSFI in a written statement.
Separately, the venture capital arm of the Ontario Municipal Employees Retirement System (OMERS) said over the weekend that it has minor, indirect exposure to Silicon Valley Bank.
U.S. Regulators Protect Deposits
In the U.S., regulators stepped in during the weekend to try and contain the contagion from Silicon Valley Bank’s $200 billion U.S. collapse, announcing that all deposits at the lender are secure and insured.
Specifically, the U.S. government said that all depositors at Silicon Valley Bank would be paid back in full and that people and companies will be able to access their money today (March 13).
The U.S. Federal Reserve set up an emergency lending program, with approval from the U.S. Treasury Department, to divert funding to eligible banks and help ensure that they are able to meet the needs of all depositors as well.
The U.S. government held an auction over the weekend to try to sell Silicon Valley Bank. While no suitor emerged for the entire bank, British lender HSBC (HSBC) said that it will buy the British subsidiary of Silicon Valley Bank.
Silicon Valley Bank, which primarily lends money to technology start-ups and venture capitalists in California, was taken over by regulators on March 10 after it endured a bank run and capital collapse as depositors pulled $40 billion U.S. out of the lender in a little more than 24 hours.
Founded in 1983, Silicon Valley Bank was little known outside of tech circles. However, Silicon Valley Bank was the 14th largest commercial bank in the U.S. with $209 billion U.S. in assets. Its failure is the second largest in U.S. history after the $307 billion U.S. collapse of Washington Mutual during the 2008 financial crisis.
Contagion Spreads
Contagion from the failure of Silicon Valley Bank has spread to tech stocks, with companies such as Roku (ROKU) and Roblox (RBLX) announcing that they had hundreds of millions of dollars tied up in the lender.
Bank stocks have also fallen sharply in recent days, including in Canada. Royal Bank of Canada (RY), the country’s largest lender, saw its stock fall nearly 3% in recent days as worries about the stability of the global financial system spread.
In all, nearly $20 billion in value has been erased from Canada’s top bank stocks in the last week of trading.
Silicon Valley Bank’s stock fell more than 60% last week before trading in the security was halted in the U.S.
