It was called Silicon Valley Bank, but its collapse is causing shockwaves around the world.
From winemakers in California to startups across the Atlantic Ocean, companies are scrambling to figure out how to manage their finances after their bank suddenly shut down Friday.
The meltdown means distress not only for businesses but also for all their workers whose paychecks may get tied up in the chaos.
California Governor Gavin Newsom said on Saturday that he’s talking with the White House to help “stabilise the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.”
U.S. customers with less than $250,000 in the bank can count on insurance provided by the Federal Deposit Insurance Corp. Regulators are trying to find a buyer for the bank in hopes customers with more than that can be made whole. That includes customers like Circle, a big player in the cryptocurrency industry.
It said it has about $3.3 billion of the roughly $40 billion in reserves for its USDC coin at SVB.
That caused USD Coin’s value, which tries to stay firmly at $1, to briefly plunge below 87 cents Saturday.
It later rose back above 97 cents, according to CoinDesk. Across the Atlantic, startup companies woke up Saturday to find SVB’s U.K. business will stop making payments or accepting deposits.
The Bank of England said late Friday that it will put Silicon Valley Bank UK in its insolvency procedure, which will pay out eligible depositors up to 170,000 British pounds ($204,544) for joint accounts “as quickly as possible.” “We know that there are a large number of startups and investors in the ecosystem who have significant exposure to SVB UK and will be very concerned,” Dom Hallas, executive director of Coadec, which represents British startups, said on Twitter.
He cited “concern and panic.” The Bank of England said SVB UK’s assets would be sold to pay creditors.
It’s not just startups feeling the pain. The bank’s collapse is having an effect on another important California industry: fine wines. It’s been an influential lender to vineyards since the 1990s.
Tara Fung, co-founder and CEO of tech startup Co:Create that helps launch digital loyalty and rewards programmes, said her firm uses multiple banks besides Silicon Valley Bank so was able switch over its payroll and vendor payments to another bank Friday.
Fung said her firm chose the bank as a partner because it is the “gold standard for tech firms and banking partnerships,” and she was upset that some people seemed to be gloating about its failure and unfairly tying it to doubts about cryptocurrency ventures.
San Francisco-based employee performance management company Confirm.com was among the Silicon Valley Bank depositors that rushed to pull their money out before regulators seized the bank.
Co-founder David Murray credits an email from one of Confirm’s venture capital investors, which urged the company to withdraw its funds “immediately,” citing signs of a run on the bank.
Such actions accelerated the flight of cash, which led to the bank’s collapse.
“I think a lot of founders were sharing the logic that, you know, there’s no downside to pulling up the money to be safe,” Murray said. “And so we all did that, hence the bank run.”
