Silicon Valley Bank had exclusivity clauses with some of its clients, limiting their ability to tap banking services from other institutions, SEC filings show. The contracts, which made it impossible for those clients to safely diversify where they kept their money, varied in language and scope.
Federal Deposit Insurance Corporation only insures up to $250,000 in deposits for each client, leaving SVB’s customer base, which is heavily concentrated in tech startups, fearful that millions of dollars in operating funds would be locked up for an indefinite period of time.
As part of a multi-million dollar financing agreement with online-lending platform Upstart Holdings, SVB required that the company maintain all of its “operating and other deposit accounts, the Cash Collateral Account and securities/investment accounts” with SVB. The contract made certain allowances for accounts at other banks, but set strict limits on their size.
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