Silicon Valley Bank was taken over by regulators today following a week of abnormality that included a sale of securities on Wednesday, capital raising efforts on Thursday and a stock plummet of nearly 70% this morning.

“The California Department of Financial Protection and Innovation (DFPI) announced today that, pursuant to California Financial Code section 592, it has taken possession of Silicon Valley Bank, citing inadequate liquidity and insolvency,” a release from California’s DFPI stated.

SVB, a Santa Clara, Calif.-based, state-chartered commercial bank, had $209 billion in total assets and $175.4 billion in total deposits as of Dec. 31, 2022, according to the release.

Today’s news “reinforces the importance and value of having a strategic, planful approach to growing low-cost, sticky, core deposits that are large … but they are not concentrated in a single industry sector,” Kris Lazzaretti, executive vice president of data-driven marketing agency First Manhattan Consulting Group, told Bank Automation News.

Deposit diversification

“SVB had a very concentrated deposit base,” Lazzaretti said, noting that banks can lean on their own data to broaden their deposits and “drive better efficiency and overall deposit gathering.”

The technology and data aggregation abilities since 2006 and 2007 have changed significantly and using that data to diversify the deposit base, “that’s a key consideration for any startup or VC-backed company,” he said.

“With the rise of cloud-based technology and the ability to aggregate data from many, many different sources, using that technology, overlaying the right set of modern targeting tools, which can include AI and machine learning … you can build uniquely powerful audiences,” he added.

Bank automation within cloud providers, including Amazon Web Services, Google Cloud and Microsoft Azure, allows banks to set up tech stacks in near real time to better understand consumer and business clients, Lazzaretti said, noting, “That is probably the cautionary tale.”

Fintech clients

SVB had 2,690 fintech clients, according to its website. The most recent investment activity for the bank was March 8, when identity verification platform Socure raised $95 million, according to Crunchbase.

The independent third-party fintechs that had partnerships with SVB included:

• Cloud-native core banking platform Thought Machine;
• Accounts payable platform Melio;
• AI-based lending marketplace Upstart;
• Buy now, pay later platform Affirm;
• Embedded banking fintech Treasury Prime; and
• Challenger bank SoFi.

Thought Machine, although listed on the bank’s site, does not “have any formal partnership with SVB,” a Thought Machine spokesperson said. “Our main banking relationship is held elsewhere therefore does not impact our operations.”

Venture capital firms and fintech partners pulled their money from the bank starting Thursday following advice from Peter Thiel’s Founders Fund.

Earlier this year, SVB led funding rounds for real estate app Nada, open-source time series database InfluxData and medical device company Miach Orthopaedics.