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It’s hard to overstate the impact Silicon Valley Bank had on the startup world and the ripple effect this month’s collapse had on the global tech sector and banking system.
While SVB was largely known as a regional bank to those outside the tight-knit venture capital sphere, in certain circles it had become an integral part of the community – a bank that mastered the idiosyncrasies of the tech world and helped pave the way for the Silicon Valley-based boom that has swallowed up much of the economy over the past three decades.
The collapse of the SVB was the largest bank failure since the 2008 financial crisis: it was the country’s 16th-largest bank, with approximately $342 billion in client funds and $74 billion in loans.
At the time of the collapse, about half of all venture capital-backed technology and life science companies in the US banked with SVB. In total, it has been the bank for approximately 2,500 venture firms, including Andreessen Horowitz, Sequoia Capital, Bain Capital and Insight Partners.
But SVB’s influence went beyond lending and banking — former CEO Gregory Becker served on the boards of numerous Bay Area tech advocacy groups. He has served as president of the TechNet trade association and the Silicon Valley Leadership Group, as a director of the Federal Reserve Bank of San Francisco, and as a member of the U.S. Department of Commerce’s Digital Economy Board of Advisors.
There is no doubt that the failure of Silicon Valley Bank has left a huge hole in the technology. The question is how to fill that gap.
Find out, For the bell spoke with Ahmad Thomas, president and CEO of the Silicon Valley Leadership Group. The influential advocacy group is working to convene its hundreds of member companies — including Amazon, Bank of America, BlackRock, Google, Microsoft, and Meta — to discuss what happens next.
This interview has been edited for length and clarity.
Before the bell: What’s the feeling on the ground with tech and VC leadership in Silicon Valley?
Ahmed Thomas: Silicon Valley Bank has been an important part of our fabric here for four decades. SVB was truly a pillar of society and the innovation economy. The absence of SVB – that void – and coalescing leaders to fill that void is where my energy is focused and that is no small feat.
I would say there was a pretty high level of unease a few days ago, and I believe the quick steps that leaders in Washington have taken have helped quell a good portion of that unease, but if we look at Credit Suisse and First Republic just over the past few days, it is clear that we are in a situation that will continue to develop over the coming weeks and months.
So how do you fill it?
We are working to be a voice around stability, particularly on the fundamentals of the innovation economy. We can acknowledge the void given the absence of Silicon Valley Bank, but I think we need votes there to emphasize very clearly that the fundamentals and the innovation infrastructure here in Silicon Valley remain robust.
This is a time where I think people need to step back, let cooler heads prevail, and understand that there are opportunities, both from an investment standpoint, a community engagement standpoint and a corporate social responsibility standpoint, for new leaders in Silicon Valley to step up.
Are you advocating for more permanent regulation in DC?
It’s way too early for that. But if there are opportunities to improve access to capital for entrepreneurs to founders of color or in marginalized communities and if there are opportunities to drive innovation and economic growth, we will always be at the table for those conversations.
Do you have any idea how long this crisis will last? What’s your view?
The problem is twofold: a crisis of confidence and the economic conditions on the ground. Economic conditions remain volatile for several reasons: the weakening economy, inflationary pressures and the interest rate environment. But I think we need to focus now on stabilizing confidence in the investor community, our community of business leaders and the wider stakeholder community around the power of the innovation economy. That is something that we need to strengthen in the short term.
From CNN’s Mark Thompson
Switzerland’s largest bank, UBS, has agreed to buy its ailing rival Credit Suisse (CS) in an emergency bailout deal designed to halt the panic in financial markets sparked by the bankruptcy of two US banks earlier this month .
“UBS today announced the acquisition of Credit Suisse,” the Swiss National Bank said in a statement. It said the rescue would “ensure financial stability and protect the Swiss economy”.
UBS is paying 3 billion Swiss francs ($3.25 billion) for Credit Suisse, about 60% less than the bank was worth when markets closed Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for shares that were worth 1.86 Swiss francs on Friday.
Extraordinarily, the deal will not require shareholder approval after the Swiss government agrees to change the law to remove any uncertainty surrounding the deal.
Credit Suisse has been losing investor and customer confidence for years. In 2022, it posted its biggest loss since the global financial crisis. But confidence collapsed last week after it acknowledged “material weakness” in its accounting and as the demise of Silicon Valley Bank and Signature Bank spread fear to weaker institutions at a time when rising interest rates have undermined the value of some financial assets.
Read more here.
From CNN’s David Goldman
A week after Signature Bank filed for bankruptcy, the Federal Deposit Insurance Corporation said it sold most of its deposits to Flagstar Bank, a subsidiary of New York Community Bank.
On Monday, Signature Bank’s 40 branches will operate as Flagstar Bank. Signature customers don’t need to make any changes to do their banking on Monday.
New York Community Bank bought virtually all of Signature’s deposits and a total of $38.4 billion in company assets. That includes $12.9 billion in loans from Signature, which New York Community Bank bought at a hefty discount — it only paid $2.7 billion for it. New York Community Bank also paid for the FDIC shares that could be worth up to $300 million.
At the end of last year, Signature had more than $110 billion in assets, including $88.6 billion in deposits, showing how the run against the bank two weeks ago led to a massive drop in deposits.
Not included in the transaction are approximately $60 billion in other assets, which will remain under the trusteeship of the FDIC. It also doesn’t include $4 billion in deposits from Signature’s digital banking business.
Read more here.