Fall of Silicon Valley Bank: US's worst banking disaster since 2008

The greatest banking collapse in the United States since the 2008 financial crisis and the second-largest ever saw regulators close Silicon Valley Bank (SVB) on Friday and take its deposits.

The bank's 40-year reign came to an end within 48 hours due to a panic brought on by the very venture capital community that SVB had supported and served.

"Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver," read FDIC's press statement on Friday.

"To protect insured depositors, the FDIC created the Deposit Insurance National Bank of Santa Clara (DINB). At the time of closing, the FDIC as receiver immediately transferred to the DINB all insured deposits of Silicon Valley Bank."

When SVB informed investors that it needed to raise $2.25 billion to strengthen its balance sheet late on Wednesday, the company's downward spiral was ignited.

A reputable bank that had expanded alongside its technological clients saw a swift collapse as a result.

"This was a hysteria-induced bank run caused by VCs," Ryan Falvey, a fintech investor at Restive Ventures, told CNBC. "This is going to go down as one of the ultimate cases of an industry cutting its nose off to spite its face."

Tech firms unsure of how to pay bills?

Important tech firms and the venture capital industry are uncertain about their money deposits in light of the SVB collapse.

Payroll issues are more complicated than simply gaining access to frozen cash because many of those services are provided by independent contractors that were collaborating with SVB.

"The number one question is, 'How do you make payroll in the next couple days,'" said Ryan Gilbert, founder of venture firm Launchpad Capital. "No one has the answer."

The amount of money the regulator receives as it sells Silicon Valley assets or whether another bank acquires the remaining assets will determine whether depositors with more than $250,000 in their accounts ultimately receive all of their money back.

The tech sector worries that some businesses could have trouble paying their employees while that procedure is still in progress.

However, the insured depositors will have access to their funds no later than Monday morning, according to the FDIC's notification. The regulator will also have supervision over the branch offices of SVB during this period

SVB had around $209 billion in total assets and $175.4 billion in total deposits as of the end of December. What percentage of the deposits were above the insurance cap was unknown, according to the FDIC.

Washington Mutual, which had assets at $307 billion, was the last American bank of this size to fail.