In just 48 hours, Silicon Valley Bank experienced a collapse that resulted in the second-largest failure of a financial institution in US history. As one of the 20 largest commercial banks in America, it was unable to repay customers who had withdrawn their deposits and is now being overseen by the FDIC. While experts have reassured the public that the collapse will not lead to a wider contagion, it is possible that there could be significant consequences for the startup and tech sectors in the days and weeks to follow.
Below TSG has compiled key articles and opinions to keep you up-to-speed on the latest. Bookmark this post – we will continue to update as new developments arise.
Overview
- WSJ | What’s Going on With Silicon Valley Bank?
- One of the big questions coming out of this will be which banks misjudged the match between the cost and lifespan of their deposits and the yield and duration of their assets. This is very different from the questions about bad lending that haunted the 2008 financial crisis.
- NPR | A Silicon Valley Lender Collapses After a Run on the Bank. Here’s What to Know
- Although it was not in the same league as, say, Goldman Sachs or J.P. Morgan Chase, Silicon Valley Bank, or SVB, punched above its weight during its 40-year history. Based in Santa Clara, Calif., its clients included venture capital firms and startups, and it became a big player in the tech sector, successfully competing with bigger-name banks.
- Yahoo! Finance | SVB’s Sudden Shutdown Sparks Panic – But Some Saw Red Flags Months Ago
- “I’ve never seen a situation like this change so quickly,” says Wettlaufer, partner at the short-selling shop Bleecker Street Research, which opened its short position into SVB in January. Wettlaufer wasn’t talking about the events of the last two and a half days—when a bank run ushered the California financial regulator into its offices to close it down not long after SVB said it was raising more than $2 billion in capital through a share sale. No—Wettlaufer was referring to the last two years.
- CNN Business | First Citizens Bank to Purchase Assets of Silicon Valley Bank
- First Citizens Bank is buying most of the business of Silicon Valley Bank, the US tech lender that failed earlier this month. The Federal Deposit Insurance Corporation (FDIC) said in a statement late Sunday it had agreed that First-Citizens Bank & Trust Company (FCIZP) would buy all of SVB’s deposits and loans that regulators had transferred to a bridge bank in the wake of its collapse.
Fallout
- CNBC | U.S. Government Steps In and Says People with Funds Deposited at SVB Will be Able to Access Their Money
- Banking regulators devised a plan Sunday to backstop depositors with money at Silicon Valley Bank, a critical step in stemming a feared systemic panic brought on by the collapse of the tech-focused institution.
- CNN | Takeaways from Americas Second-Largest Bank Failure
- SVB was a top lender for the startup community, whose founders now worry about getting their money out, making payroll and covering operating expenses, Catherine Thorbecke wrote. “Now that the bank has folded, I just want to know what happens next,” Ashley Tyrner, founder of health food delivery company FarmboxRx, told CNN in an e-mail. “The FDIC covers 250K, but am I going to recover my whole 8 figures?”
- CBS News | First Republic Bank Shares Plummet as Banking Fears Spread
- The stock price of First Republic Bank cratered on Monday despite its attempts to quell investor fears after the sudden collapse of Silicon Valley Bank and Signature Bank. Shares of First Republic, a regional bank based in San Francisco with $213 billion in assets and 7,200 employees, fell more than 70% in early trading only one day after the company said it has added more cash to its reserves. The infusion of capital came from the Federal Reserve and JPMorgan Chase, First Republic said.
- Fortune | Goldman Sachs Says Fed Will Hit the Breaks on Interest Rate Hikes Because of SVB Collapse
- Goldman Sachs Group Inc. economists said they no longer expect the Fed to deliver a rate increase next week, even after US authorities moved to contain a crisis spurred by the exodus of depositors from Silicon Valley Bank and Signature Bank.
- Yahoo! Finance | SVB Parent, CEO, CFO are Sued by Shareholders for Fraud
- SVB Financial Group and two top executives were sued on Monday by shareholders who accused them of concealing how rising interest rates would leave its Silicon Valley Bank unit, which failed last week, “particularly susceptible” to a bank run. The proposed class action against SVB, Chief Executive Greg Becker and Chief Financial Officer Daniel Beck was filed in the federal court in San Jose, California.
- The Wall Street Journal | FDIC Planning Another Silicon Valley Bank Auction
- Regulators are planning to take another crack at auctioning failed Silicon Valley Bank, according to people familiar with the matter, after they were unable to find a buyer for the firm over the weekend. Officials from the Federal Deposit Insurance Corp. told Senate Republicans on Monday that they had additional flexibility to sell the firm now that regulators had declared its failure a threat to the financial system, according to people familiar with the briefing and notes.
- Forbes | Dow Plunges 500 Points As BlackRock Chief Warns SVB Collapse Merely ‘First Domino To Drop’
- U.S. stocks plunged in early Wednesday trading as concerns about the health of the global banking industry continued to weigh on the market, with one high-profile Wall Street bigwig cautioning the contagion of Silicon Valley Bank’s failure could spread further than previously anticipated.
- Fortune | Bank of America Won Big From the Silicon Valley Bank Collapse
- As startups and VCs scramble to get their money into safe hands following the collapse of Silicon Valley Bank, they’ve turned to a Wall Street stalwart: Bank of America. Sources familiar with the matter told Bloomberg the inflows came from fearful customers moving their money to an institution—the second biggest bank in the States—that is seen as simply too big to fail (and is considered to be so by the Federal Reserve)
- USA Today | Close to 190 Banks Could Face Silicon Valley Bank’s Fate, According to a New Study.
- On the heels of Silicon Valley Bank’s collapse earlier this month, 186 more banks are at risk of failure even if only half of their depositors decide to withdraw their funds, a new study has found. That is because the Federal Reserve’s aggressive interest rate hikes to tamp down inflation have eroded the value of bank assets such as government bonds and mortgage-backed securities.
- Yahoo! News | US Mortgage Rates Tumble by the Most in 4 Months in SVB’s WSake, MBA says
- Last week’s banking sector turmoil had at least one silver lining for U.S. home buyers: lower mortgage interest rates. Interest rates on the most popular U.S. home loan tumbled by the most in four months last week after the failure of Silicon Valley Bank and emergency measures taken to shore up the wider banking system drove a mad dash by investors to the safety of government bonds, the Mortgage Bankers Association said on Wednesday.
Payments Impact
- Digital Transactions | Will a Trio of Major Bank Failures Dampen Interest in Blockchain Technology?
- The loss of Silicon Valley Bank, in particular, “will have a wide-ranging impact” on the prospects for cryptocurrency, notes Cliff Gray, a senior associate at the Omaha, Neb.-based consultancy TSG who follows the cryptocurrency business.
- Forbes | Coinbase, Circle, Paxos: Here Are The Major Firms With Funds Tied Up In SVB And Signature Bank
- As financial regulators take the helm of Silicon Valley Bank and Signature to avoid a banking crisis, several companies have gotten caught in the turmoil, disclosing they have millions—or billions—of dollars tied up in the banks, and though the Biden Administration has assured depositors they would get their money back, many remain concerned about the potential implications.
- Tech Crunch | After SVB Failure, Regulators Close Crypto-Friendly Bank Signature Bank
- Signature Bank is the second casualty of the ongoing banking crisis in the U.S. The New York-based financial institution stopped operating abruptly on Sunday — customers will be made whole. Regulators said that Signature Bank also caused a systemic risk and could threaten the U.S. banking system. In other words, the government is stepping up to protect the economy.
- Payments Dive | Payments Players Caught in SVB Fallout
- For FIS, the spreading bank crisis could have a combined $50 million impact to annual revenue, but that still accounts for less than 1% of overall FIS revenue, Baird analysts said in a research note to clients Monday. Other companies with direct exposure to SVB included Payoneer and Bill Holdings, but both companies sought to downplay the impact. SVB serviced many venture firms and their portfolio companies.
- PYMNTS | As Silicon Valley Bank Folds, Can FinTech Outrun the Bank Runs?
- SVB’s loss may be a bonanza for neobanks — many of them are startups themselves, so we’ll see if they’ve got the capacity/ability to onboard a mad rush of new clients. As noted by CNBC, Brex has already seen billions of dollars worth of inflows from SVB customers. So has J.P. Morgan Chase and other more traditional names.
- Payments Dive | Retail Brands React to Silicon Valley Bank’s Collapse
- The Federal Deposit Insurance Corp. announced Friday that the startup and tech-focused firm closed and its deposits were taken over by regulators. This came just two days after SVB announced nearly $2 billion in losses on the sale of U.S. treasuries and mortgage-backed securities, after mounting declines in deposits. After the company said it planned to sell stock in order to raise around $2.25 billion in capital, its stock price tumbled and worried clients began rushing to withdraw their funds.
- Morningstar Investor | Fiserv, FIS Stocks Claw Back as SVB Signature Bank Exposure Dubbed ‘Minimal’
- Shares of Fiserv Inc. and Fidelity National Information Services Inc. rebounded Tuesday as concerns about their regional-bank exposure appeared to ease. Fiserv shares (FISV) ended the session up 6%, snapping a six-session losing streak. The stock had lost nearly 7% in Monday’s session alone. Shares of FIS (FIS) had fallen in each of the prior three sessions, including when they logged an almost 13% plunge Monday, but they rallied Tuesday to close up 7%.