According to foreign media reports, on March 10 local time in the United States, the Federal Deposit Insurance Corporation (FDIC) issued a statement stating that Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation (DFPI), And appointed FDIC as bankruptcy administrator.
Silicon Valley Bank is the 16th largest bank in the United States, focusing on PE / VC and technology-based enterprise financing, mainly providing financing for technology start-ups supported by venture capital institutions. Its customers are highly concentrated in high-tech start-up companies, and nearly half of the country’s technology start-ups have financing with Silicon Valley Bank. It is reported that Silicon Valley Bank’s main profit is to provide short-term bridge loans to VC/PE, and this business accounts for about 56%.
People in Silicon Valley and the financial community have called on the U.S. federal government to push another bank to assume responsibility for its assets and liabilities following the collapse of Silicon Valley Bank. According to the statement, the FDIC will provide $250,000 in insurance for each SVB depositor, but most SVB depositors have more than that amount in deposits, including a large number of startups. Analysts believe that the bankruptcy of Silicon Valley Bank may trigger widespread closures and layoffs in the technology industry.
With the bankruptcy of Silicon Valley Bank, many domestic start-ups are also worried about being affected and affected. On the 11th, Silicon Valley Bank’s joint venture bank in China, “SPD Silicon Valley Bank”, issued an urgent statement stating that the company has an independent balance sheet.
Silicon Valley Bank went bankrupt overnight after being run on $42 billion
The collapse of Silicon Valley Bank can be described as very sudden. Affected by business, Silicon Valley Bank has no retail business and does not accept personal savings deposits. Its external loan funds mainly come from the deposits of venture capital institutions and the deposits of start-up companies that have obtained financing.
Before the market opened on March 9, US time, Silicon Valley Bank issued an announcement announcing that it would sell all of its US$21 billion of marketable securities, which would result in a loss of US$1.8 billion, and sought to raise US$2.25 billion through the sale of equity.
After Silicon Valley Bank announced the above news, there were a lot of doubts about Silicon Valley Bank’s ability to pay, and some fast-moving venture capital funds began to withdraw funds from Silicon Valley Bank. Shares of Silicon Valley Bank fell more than 60% at the close of trading on Thursday.
During the pre-market trading session of the US stock market on March 10, as investors panicked, the share price of Silicon Valley Bank fell by 68% again. Silicon Valley Bank immediately announced the suspension of stock trading, and the management tried to pay for deposits and withdrawals through emergency financing, selling stocks, etc. in exchange for liquidity, but all efforts failed. Silicon Valley Bank was declared bankrupt on the 10th, and the FDIC took over.
According to foreign media reports, a document submitted by California regulators in the United States showed that as of March 9, Silicon Valley Bank customers had withdrawn a total of US$42 billion in deposits, and Silicon Valley Bank’s cash balance was negative US$958 million.
The sudden bankruptcy of Silicon Valley Bank has caused heavy losses to the venture capital circle. According to media reports, many venture capital funds have not yet come and successfully transferred the money out. Once the start-up company’s money is not withdrawn in time, there may be problems with salary payment.
All investment depositors will have untill March 13, 2023 to fully receive their investment deposits, according to an announcement from the FDIC, the administrator of Silicon Valley Bank. The FDIC will issue advances to uninsured depositors within the next week. Uninsured depositors will receive a certificate of receivership for the remaining amount of the uninsured fund. With the FDIC selling Silicon Valley Bank’s assets, there could be future dividend payments to uninsured savers.
In addition, Silicon Valley Bank has 17 branches in California and Massachusetts. Silicon Valley Bank’s headquarters and all branches will reopen, March 13, 2023. As of December 31, 2022, SVB had total assets of approximately $209 billion and total deposits of approximately $175.4 billion. At the time of settlement, the amount of deposits in excess of the insurance limit has not been determined. Once the FDIC has more information from the bank and the customer, it will determine the amount of the uninsured deposit.
SPD Silicon Valley Bank issued a statement
The sudden bankruptcy of Silicon Valley Bank in the United States has made domestic companies, especially many US-dollar VC / PE and start-up companies, worried about being affected and affected.
SPD Silicon Valley Bank, a joint venture bank established by Silicon Valley Bank of the United States and Shanghai Pudong Development Bank in China, issued an urgent announcement on the 11th that: SPD Silicon Valley Bank was established in August 2012 and is a legal person bank registered in China. SPD Silicon Valley Bank has a standardized corporate governance structure and an independent balance sheet. As China’s first technology bank, SPD Silicon Valley is committed to serving Chinese science and technology companies, and has always operated steadily in accordance with Chinese laws and regulations.
According to information, Shanghai Pudong Development Silicon Valley Bank is held 50% by Shanghai Pudong Development Bank and Silicon Valley Bank.
According to the 2021 annual report released by Shanghai Pudong Development Silicon Valley Bank, about 98% of the companies it serves are Chinese local science and technology companies. As of the second quarter of 2021, the bank has served more than 3,000 corporate customers.
At present, it is not clear the impact of the bankruptcy of the US Silicon Valley Bank on related domestic businesses.
Many analysts believe that the bankruptcy of Silicon Valley Bank is due to the maturity mismatch caused by “borrowing short to buy long” (that is, short-term funding sources and long-term use of funds) under the high interest rate environment brought about by the Fed’s rapid and substantial interest rate hikes ( Due to the mismatch between the term of the asset end and the term of the liability end).
Regarding the sudden bankruptcy of Silicon Valley Bank in the United States, Internet investor Zhuang Minghao posted on his Weibo: “If we say that in the past 20 years, the Internet + VC complement each other to create Silicon Valley, then this effect has also created SVB, a special bank. ‘Banks’. So today, the entire Internet + VC narrative has gone, and the so-called Internet + Silicon Valley myth of wealth creation has also begun to go away.”
