Silicon Valley Bank collapse: This bank was called Silicon Valley Bank, but its failure has sent Shockwaves around the globe.
New York: Companies throughout the globe are trying to find a new way to handle their money after their bank abruptly closed on Friday. This includes wineries in California and startups on the other side of the Atlantic. Businesses are worried, and so are their employees, because their wages could be caught up in the confusion.
In a Saturday statement, California Governor Gavin Newsom said he is in contact with the White House to “stabilize the situation as swiftly as possible, to protect employment, people’s livelihoods, and the entire innovation ecosystem that has acted as a tent pole of our economy.”
Deposits of less than $250,000 made by U.S. residents at insured financial institutions are protected by the Federal Deposit Insurance Corp. Government officials are looking for a buyer for the bank so that anyone whose losses exceed that amount can be compensated.
Customers like Circle, a leader in the bitcoin space, are included in this category. Of of a total of $40 billion in reserves for its USDC coin, it claims to have $3.3 billion at SVB. As a result, the value of USD Coin, which attempts to maintain a stable $1 price, temporarily dropped below 87 cents on Saturday. Then, it climbed back up to above 97 cents, per CoinDesk.
On Saturday morning, new businesses on the other side of the Atlantic learned that SVB’s U.K. operation would no longer process payments or accept deposits. Late on Friday, the Bank of England announced that it will begin insolvency proceedings against Silicon Valley Bank UK, promising to “as swiftly as possible” reimburse depositors up to 170,000 British pounds ($204,544) for joint accounts.
On Twitter, Dom Hallas, the executive director of Coadec, which represents British startups, expressed worry that “a big number of companies and investors in the ecosystem” had “substantial exposure” to SVB UK. Worry and a sense of urgency were among the reasons he gave.
In order to settle debts, the Bank of England has announced that SVB UK will liquidate its holdings.
It’s not simply new businesses that are struggling. The failure of the bank is having repercussions in another vital California industry: the production of high-quality wines. During the 1990s, it has played a major role in the vineyard industry as a lender.
Jasmine Hirsch, winemaker and general manager of Hirsch Vineyards in Sonoma County, California, expressed her dismay at the news.
Hirsch has expressed confidence that her company would succeed. Yet, she is concerned about the larger repercussions on small vintners who are trying to secure credit lines in order to develop additional vineyards.
The wine industry is “right in their wheelhouse,” Hirsch remarked. “In a climate when loan rates have increased, the loss of this bank as one of the most important lenders is bound to have an impact on the wine business.”
Seattle-based startup CEO Stefan Kalb found himself mired in payroll crisis meetings instead of focusing on his company’s core business of assisting supermarkets with their food order management.
“Today has been so difficult. Several million dollars, as estimated by Kalb on Friday, are currently locked up in deposits at Silicon Valley Bank.
He’s filing a claim for the maximum amount of $250,000, but that won’t be nearly enough to keep 40 people at Shelf Engine fed for long. Because of that, he may have to decide whether or not to start furloughing workers until the problem is cleaned up.
Kalb expressed his desire for a sale of the bank over the weekend.
Co:CEO Create’s and co-founder Tara Fung said the company was able to turn over payroll and vendor payments from Silicon Valley Bank to another bank on Friday since it uses numerous banks.
Fung stated that the bank was the “gold standard for tech enterprises and banking relationships,” and she was dismayed to see some people seemingly exult over its loss and inappropriately link it to reservations about crypto currency initiatives.