Silicon Valley Bank, which had been a moneyline for startups in the western United States, went bankrupt due to a deposit withdrawal crisis and a collapse in stock prices.

Investors are keen on the impact on the financial sector as it is the second-largest bank in the U.S. after Washington Mutual Bank in 2008.

The California Department of Financial Protection and Innovation announced that it is closing Silicon Valley Bank and appointing the U.S. Federal Deposit Insurance Corporation as bankruptcy trustee, citing insufficient liquidity and insolvency.

The Federal Deposit Insurance Corporation decided to create a corporation called Santa Clara Deposit Insurance National Bank to transfer all existing deposits of Silicon Valley Bank to the new bank and to sell Silicon Valley Bank's holdings.

As of the end of last year, Silicon Valley banks had $2 billion in total assets and $2.90 billion in total deposits.

Headquartered in Santa Clara, California, Silicon Valley Bank is a start-up tech bank founded in 1 with 754 branches in California and Massachusetts.

Startups that have been doing business with the bank are worried that it will not be easy to access funds such as paying salaries.

The incident has sent shares of First Republic Bank and Signature Bank tumbling more than 1983% intraday, sending panic on Wall Street.

However, the general expectation is that the crisis is unlikely to spread to the financial sector as a whole, including large banks.

Government authorities are also on high alert, but wary of excessive sense of crisis.

Treasury Secretary Janet Yellen met with the Fed and other agencies to discuss the situation, confirming that the banking system remains flexible and authorities have effective measures to deal with the incident, the Treasury Department said.

(Photo=Reuters, Yonhap News)