Payments

Some SVB customers have to pay back loans, despite deposit loss

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June 20, 2023

Silicon Valley Bank collapsed earlier this year due to a variety of factors including an over investment into government bonds and a major run by depositors which left the bank $958 million in the hole, prompting the U.S. government to step in. However, some depositors still owe loan payments to SVB's new parent, First Citizens Bank, despite having lost their deposits, according to a Forbes report.

In particular, Asia-based clients were not protected by the Federal Deposit Insurance Corp.'s deposit protection. But these clients used money from their SVB bank accounts to pay down these loans, which were lost in the collapse. The clients asked First Citizens Bank if they could use Cayman bank accounts from SVB's former holding company, SVB Financial Group, but First Citizens has said this wouldn't be possible legally as it only owns the credit lines.

First Citizens said it is open to the possibility of giving the clients extra time to pay back the loan.

SVB wasn't the only bank to collapse in recent months. Signature Bank also fell apart as it was caught in the crossfire of the SVB bank run. First Republic suffered the same fate as customers pulled out $100 billion in deposits in March, prompting JPMorgan Chase to acquire the bank in May.