From wine country to London, bank’s failure shakes worldwide
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 Gov. Gavin Newsom said Saturday that he’s talking with the White House to help “stabilize 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.
“This is a huge disappointment,” said winemaker Jasmine Hirsch, the general manager of Hirsch Vineyards in California’s Sonoma County.
Hirsch said she expects her business will be fine. But she’s worried about the broader effects for smaller vintners looking for lines of credit to plant new vines.
“They really understand the wine business,” Hirsch said. “The disappearance of this bank, as one of the most important lenders, is absolutely going to have an effect on the wine industry, especially in an environment where interest rates have gone up.”
In Seattle, Shelf Engine CEO Stefan Kalb found himself immersed in emergency meetings devoted to figuring how to meet payroll instead of focusing on his startup company’s business of helping grocers manage their food orders.
“It’s been a brutal day. We literally have every single penny in Silicon Valley Bank,” Kalb said Friday, pegging the deposit amount that’s now tied up at millions of dollars.
He is filing a claim for the $250,000 limit, but that won’t be enough to keep paying Shelf Engine’s 40 employees for long. That could force him into a decision about whether to begin furloughing employees until the mess is cleaned up.
“I’m just hoping the bank gets sold during the weekend,” Kalb said.
Tara Fung, co-founder and CEO of tech startup Co:Create that helps launch digital loyalty and rewards programs, 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.
STAN CHOE & BOBBY CAINA CALVAN, NEW YORK, MDT/AP
