US regulators have shut down Silicon Valley Bank (SVB) and taken control of its customer deposits in the largest failure of a US bank since 2008. The moves came as the firm, a key tech lender, was scrambling to raise money to plug a loss from the sale of assets affected by higher interest rates. Its troubles prompted a rush of customer withdrawals and sparked fears about the state of the banking sector. Officials said they acted to “protect insured depositors”. Silicon Valley Bank faced “inadequate liquidity and insolvency”, banking regulators in California, where the firm has its headquarters, said as they announced the takeover. The Federal Deposit Insurance Corporation (FDIC), which typically protects deposits up to $250,000, said it had taken charge of the roughly $175 billion (£145 billion) in deposits held at the bank, the 16th largest in the US. Bank offices would reopen and clients with insured deposits would have access to funds “no later than Monday morning”, it said, adding that money raised from selling the bank’s assets would go to uninsured depositors. With many of the firm’s customers in that position, the situation has left many companies with money tied up at the bank worried about their future. “I’m on my way to the branch to find my money right now. Tried to transfer it out yesterday didn’t work. You know those moments where you might be really screwed but you’re not sure? This is one of those moments,” one start-up founder told the BBC. Another founder of a healthcare start-up said: “Literally three days ago, we just hit a million dollars in our bank account... And then this happens.” He managed to get the money wired to a different account 40 minutes before the deadline. “It was pending. And then this morning, it was there. But I know other people who did the same thing minutes after me, and it’s not transferred.” “It was a crazy situation,” he said. The collapse came after SVB said it was trying to raise $2.25 billion (£1.9 billion) to plug a loss caused by the sale of assets, mainly US government bonds, which had been affected by higher interest rates. The news caused investors and customers to flee the bank. Shares saw their biggest one-day drop on record on Thursday, plunging more than 60% and fell further in after-hours sales before trading was halted. Concerns that other banks could face similar problems led to widespread selling of bank shares globally on Thursday and early Friday. Speaking in Washington on Friday, US Treasury Secretary Janet Yellen said she was monitoring “recent developments” at Silicon Valley Bank and others “very carefully”. She later met with top banking regulators, where the Treasury Department said she expressed “full confidence in banking regulators to take appropriate actions in response and noted that the banking system remains resilient”. A crucial lender for early-stage businesses, the company is the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year. The firm, which started as a California bank in 1983, expanded rapidly over the last decade. It now employs more than 8,500 people globally, though most of its operations are in the US. But the bank has been under pressure, as higher rates make it harder for start-ups to raise money through private fundraising or share sales, and more clients withdrew deposits, moves that snowballed this week. In Silicon Valley the reverberations from the collapse were widespread as companies faced questions about what the collapse meant for their finances. Even businesses without direct business were affected, like customers of Rippling, a firm that handles payrolls software and had used SVB. It warned that current payments may face delays and said it was switching its business to another bank. SVB’s UK subsidiary said it will be put into insolvency from Sunday evening. The Bank of England said Silicon Valley Bank UK would stop making payments or accepting deposits in the interim and the move would allow individual depositors to be paid up to £85,000 from the UK’s deposit insurance scheme. “SVBUK has a limited presence in the UK and no critical functions supporting the financial system,” the BoE added. As well as being a major blow to the tech industry, the collapse of SVB has raised concerns about the wider risks facing banks, as rapid increases in interest rates hit bond markets. Central banks around the world — including the US Federal Reserve and the Bank of England — have sharply raised borrowing costs over the last year as they try to curb inflation. But as rates rise, the value of existing bond portfolios typically declines. Those falls mean many banks are sitting on significant potential losses — though the change in value would not typically be a problem unless other pressures force the firms to sell the holdings. Shares in some major US banks recovered on Friday, but the sell-off continued to hit smaller firms, forcing trading halts of names such as Signature Bank and others. The tech-heavy Nasdaq ended the day down 1.7%, while the S&P 500 dropped 1.4% and the Dow closed 1% lower. Major European and Asian indexes also closed lower, with the FTSE 100 down 1.6%. Alexander Yokum, equity research analyst at CFRA, said banks that specialize in single industries are seen as vulnerable to rapid withdrawals, like the one that hit SVB. “Silicon Valley Bank would not have lost money if they hadn’t run out of cash to give back to their customers,” he said. “The issue was that people wanted money and they didn’t have it - they had it invested and those investments were down.” “I know there’s a lot of fear, but it’s definitely company-specific,” he said. “The average Joe should be fine,” he added, but he said tech firms would likely find it even harder to raise money. “It’s not good,” he said. — BBC