The Government is monitoring the potential fallout from the collapse of Silicon Valley Bank (SVB), as US regulators moved to shore up the wider financial system with a series of extraordinary measures on Sunday night.
US authorities moved late on Sunday to assure all SVB depositors their money is safe and set up a new lending programme aimed at buttressing the wider financial system. The moves came two days after the lender collapsed into receivership in the biggest bank failure the United States in more than a decade. The Federal Deposit Insurance Corporation (FDIC) began an auction for SVB’s assets over the weekend, and a winning bid could be announced before businesses open on Monday.
Here, the Department of Finance “is monitoring developments” and “engaging with the relevant authorities,” a spokesman said in response to questions. “While there is limited direct impact on the Irish financial system, Silicon Valley Bank was a lender to some Irish companies since 2012,” he said.
“The department will monitor the progress” of the sale process and “what impact that may have on domestic companies impacted by this failure,” he added.
The UK government is already putting together a package to safeguard companies there that have deposits tied up with SVB’s British unit, chancellor Jeremy Hunt said on Sunday.
[ Silicon Valley Bank shutdown sparks Irish start-up worries ]
SVB made a number of investments in the Irish start-up ecosystem since it began operating here in 2012. Among the Irish companies that have successfully done business with SVB in the past are Diaceutics, Accuris, Boxever, Clavis Insight, Profitero, Glofox, AMCS, and Intel-owned Movidius.
As of the end of February, the Irish Strategic Investment Fund had about $100 million (€94 million) invested in funds linked to SVB. A spokesman for ISIF said the investments were structured “in a manner that legally ringfences them” from the rest of SVB.
Irish software firm Intercom has about $22 million of deposits stuck in SVB, company chief executive Eoghan McCabe said in a tweet. The vast majority of it’s capital is not held at that bank, he added.
In the US, concern about the health of other smaller banks focused on the venture capital and start-up communities prompted regulators to take action. Treasury Secretary Janet Yellen approved the moves, which will enable the resolution of SVB “in a manner that fully protects all depositors,” the Treasury said Sunday in a joint statement with the Federal Reserve and FDIC on Sunday night.
SVB depositors “will have access to all of their money starting Monday, March 13,” the government said. The statement noted that US taxpayers won’t be responsible for any losses associated with SVB’s resolution.
The Federal Reserve said in a separate statement that it’s “prepared to address any liquidity pressures that may arise” and is creating a new “Bank Term Funding Program” that offers loans to depository institutions that pledge assets “valued at par.”
[ Collapse of Silicon Valley Bank will be watched closely ]
US regulators’ efforts over the weekend are aimed at protecting depositors, rather than bailing out investors, Yellen said earlier on Sunday.
“During the financial crisis there were investors and owners of systemic large banks that were bailed out,” she said. “And we’re certainly not looking – and the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and we’re focused on trying to meet their needs.”
While the FDIC insures deposits of up to $250,000, the vast majority of funds held in at SVB far exceeded that. The agency has said it will make 100 per cent of protected deposits available on Monday.
Yellen renewed assurances that the US banking system is safe, well capitalised and resilient.
US regulators are under time pressure to sell assets of SVB Financial Group, the bank’s parent, prompting offers by some investment firms to provide financing to companies with cash trapped at Silicon Valley Bank.
Asked whether the FDIC might be open to a “foreign bank” coming in as a buyer, Yellen said: “I’m sure they’re considering a wide range of available options that include acquisitions.”
The White House repeated its assurances on the US banking system, with Office of Management and Budget director Shalanda Young citing regulatory changes put in place after the financial crisis more than a decade ago.
“What I’ll say about the banking system overall is it’s more resilient, and has a better foundation than before the financial crisis,” she said. – Additional reporting: Bloomberg
