Canada's top banking regulator takes temporary control of Silicon Valley Bank's Canadian branch

Canada's top banking regulator istaking "temporary control" of the assets ofSilicon Valley Bank's Canadian branch, a spokesperson said on Sunday, following the collapse of the California-based lender and the ensuing market instability.

Superintendent of Financial Institutions Peter Routledge also issued a notice declaring he will seek permanent control of the assets and request Canada's attorney general apply for an order to wind downthe company.

"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," Routledge said in a statement.

"I want to be clear: the Silicon Valley Bank branch in Canada does not take deposits from Canadians, and this situation is the result of circumstances particular to Silicon Valley Bank in the United States."

"The superintendent took this action to preserve the value of the assets held at the branch," the statement said.

The Office of the Superintendent of Financial Institutions (OSFI) said SVBhas operated in Canada since February, 2019, as a foreign bank branch.

U.S. regulators had to rush to close theSVB, a financial institution with more than $200 billion US in assets, on Friday when it experienced a traditional run on the bank where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual.

U.S. regulators had worked all weekend to try and come up with a buyer for the bank. Those efforts appeared to have failed as of Sunday.

U.S. vows to protect depositors

On Sunday, the U.S. government took extraordinary stepsto stop the potential banking crisis, assuring depositors at the SVB that they would be able to access all of their money quickly.

The announcement came amid fears that the factors that caused SVB to fail could spread, and only hours before trading began in Asia.

In a sign of how quickly the financial bleeding was occurring, regulators announced that New York-based Signature Bank had failed and was being seized on Sunday. At more than $110 billion US in assets, Signature Bank is the third-largest bank failure in U.S. history.

The U.S. Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporationsaid Sunday that all Silicon Valley Bank clients will be protected and have access to their funds and announced steps designed to protect the bank's customers and prevent more bank runs.

Some prominent Silicon Valley executives feared that if Washington didn't rescue the failed bank, customers would make runs on other financial institutions in the coming days. Stock prices have plunged over the last few days at other banks that cater to technology companies, including First Republic Bank and PacWest Bank.

Many industries affected

Among the bank's customers are a range of companies from California's wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change.

Sunrun, which sells and leases solar energy systems, had less than $80 million US of cash deposits with Silicon Valley Bank as of Friday and expects to have more information on expected recovery in the coming week, the company said in a statement.

Stitchfix, the popular clothing retail website, disclosed in a recent quarterly report that it had a credit line of up to $100 million US with Silicon Valley Bank and other lenders.

Canadian e-commerce company Shopify told CBC News in a statement that, although they are an SVB customer,"only a small portion of our funds and U.S.-based operations were tied to this bank."

Silicon Valley Bank began its slide into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis.

U.S. Treasury Secretary Janet Yellendescribed rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.

Sheila Bair, who was chair of the FDICduring the 2008 financial crisis, recalled that with almost all the bank failures during that time, "we sold a failed bank to a healthy bank. And usually, the healthy acquirer would also cover the uninsured because they wanted the franchise value of those large depositors so optimally, that's the best outcome."

But with Silicon Valley Bank, she told NBC's Meet the Press,"this was a liquidity failure, it was a bank run, so they didn't have time to prepare to market the bank. So they're having to do that now, and playing catch-up."