US regulators have shut down Silicon Valley Bank (SVB) and taken control of its customer deposits in the largest failure of a US bank since 2008.

The moves came as the firm, a key tech lender, was scrambling to raise money to plug a loss from the sale of assets affected by higher interest rates.

Its troubles prompted customers to rush to withdraw deposits and sparked fears about the wider banking sector.

Officials said they shut the bank to “protect insured depositors”.

The Federal Deposit Insurance Corporation (FDIC), which typically protects deposits up to $250,000, said it had taken charge of the deposits.

Clients with insured deposits would have access to funds “no later than Monday morning”, it said, adding that money raised from selling the bank’s assets would go to uninsured depositors.

The episode came after SVB said it was trying to raise $2.25bn (£1.9bn) to plug a loss caused by the sale of assets affected by higher interest rates.

The news caused investors to flee the bank. Shares saw their biggest one-day drop on record on Thursday, plunging more than 60% and fell further in after-hours trade.

Concerns that other banks could face similar problems led to widespread selling of bank shares globally on Thursday and early Friday.

SVB did not respond to a request for comment immediately.

A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of US venture-backed technology and healthcare companies that listed on stock markets last year.

Speaking in Washington on Friday, US Treasury Secretary Janet Yellen said she was monitoring “recent developments” at Silicon Valley Bank and others “very carefully”.

“When banks experience financial losses, it is and it should be a matter of concern,” she said. (BBC)

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