Members of the high-tech and venture capital communities — as well as many in the world beyond — braced today in the immediate aftermath of last week’s Silicon Valley Bank failure.
The regulators also said they had taken control of New York-based Signature Bank, which had also faltered, after becoming a major banking service provider to companies in crypto markets. The regulators announced “systemic risk exceptions” for both banks. This exception allows the regulators to take extraordinary action that goes beyond what they are are minimally required to do, and is used in rare circumstances when inaction may lead to a snowballing of investor fear.
On Friday, the Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, and the FDIC was named as receiver. That came as the bank struggled to meet customers’ often-frantic requests for withdrawals of large, uninsured holdings.
The FDIC’s move should forestall ripple effects that would see missed payday payrolls for high-tech startups. Such young companies have long relied on Silicon Valley Bank, which saw a dramatic rise in deposits in recent years as VC coffers grew and startups opened shop. For many, missed payrolls are the most immediate concern.
SVB depositors include many small businesses that “rely on access to their funds to be able to pay the bills that they have, and they employ tens of thousands of people across the country,” Treasury Secretary Janet Yellen said on Sunday.
The number of companies that missed the window to withdraw funds last week is not known. Reports indicate that adtech firm Acuity Ad Holdings, metaverse platform provider Roblox and set-top-box maker Roku were among those with unavailable deposits held at SVB on Friday. As well, crypto finance company Circle Internet Financial Ltd. said in a tweet that its wires to initiate withdrawal of $3.3B in USD coin reserves were “not yet processed” as of Friday. -JV
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