Silicon Valley Bank: no government bailout, says US treasury secretary Yellen
- Janet Yellen said the situation was very different to financial crisis almost 15 years ago, which led to bank bailouts to protect the sector
- In the UK, Prime Minister Rishi Sunak said his government was working to find a solution to limit the potential hit to companies resulting from the bank’s demise
The Federal Deposit Insurance Corporation insures deposits up to US$250,000, but many of the companies and wealthy people who used the bank – known for its relationships with technology start-ups and venture capital – had more than that amount in their account. There are fears that some workers across the country will not receive their pay cheques.
Yellen, in an interview with CBS, provided few details on the government’s next steps. But she emphasised that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry.
Collapse of Silicon Valley Bank rocks China’s tech start-ups, VC industry
“We’re not going to do that again,” she said. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”
With Wall Street rattled, Yellen tried to reassure Americans that there will be no domino effect after the collapse of Silicon Valley Bank.
“The American banking system is really safe and well capitalised,” she said. “It’s resilient.”
SoftBank-owned lender OakNorth Bank is weighing a bid to buy Silicon Valley Bank UK Ltd, a person with knowledge of the talks told Reuters, confirming a Sky News report. ADQ, an Abu Dhabi state-backed investment vehicle, is also looking at the bank in the UK, Sky also said late on Sunday.
We will bring forward very soon plans to make sure people are able to meet their cash-flow requirements to pay their staff
Bank of London, a clearing bank, has submitted a formal proposal for the UK subsidiary of Silicon Valley Bank, it said in a statement on Sunday.
“A consortium of leading private equity firms, led by The Bank of London, confirms it has submitted formal proposals to His Majesty’s Treasury, The Prudential Regulation Authority at The Bank of England and the Board of Silicon Valley Bank UK,” the statement said.
Advisory firm Rothschild & Co is exploring options for the subsidiary, as insolvency looms, two people familiar with the discussions told Reuters on Saturday. The Bank of England has said it is seeking a court order to place the UK arm into insolvency.
The collapse could have a significant impact on British technology companies, given the importance of the lender to some customers, finance minister Jeremy Hunt said earlier on Sunday.
“We’ve been working at pace over the weekend, through the night,” Hunt told Sky News. “We will bring forward very soon plans to make sure people are able to meet their cash-flow requirements to pay their staff.”
The opposition Labour shadow finance minister Rachel Reeves urged Hunt to offer more than “warm words” to companies, saying the government had to come up with a plan by the time financial markets open on Monday morning.
Sunak has said he wants to turn Britain into the “next Silicon Valley”. Britain is behind only the United States and China in terms of the level of venture capital funding for the sector, according to the government.
Silicon Valley Bank fallout spreads around world from London to Singapore
In Canada, the country’s banking regulator seized control of SVB Financial Group’s branch in the country and said it will seek a legal order to wind up the operation.
Peter Routledge, the country’s financial superintendent, “took this action to preserve the value of the assets held at the branch in light of the decision by the California Department of Financial Protection and Innovation to shut down Silicon Valley Bank,” his office said in a statement on Sunday evening.
SVB received a license to open a bank office in Toronto in 2019. It does not take commercial or retail deposits. It ended last year with C$864 million (US$627 million) in assets, including C$435 million in secured loans, according to regulatory filings.
“By taking temporary control of the Canadian branch of Silicon Valley Bank, we are acting to protect the rights and interests of the branch’s creditors,” Routledge said in a statement. “I want to be clear: the Silicon Valley Bank branch in Canada does not take deposits from Canadians, and this situation is the result of circumstances particular to Silicon Valley Bank in the United States.”
The Canadian government is also assessing the scope of the country’s exposure to SVB’s collapse. “We are monitoring and are closely in touch with leaders in the start-up and venture community,” Laurie Bouchard, a spokesperson for Industry Minister François-Philippe Champagne, said by email.
“A deal is not yet certain but I understand that both HSBC and JP Morgan are exploring buying the stricken lender,” the tweet added.
HSBC traces its origins to a business in Hong Kong. Its present form was established in London in 1991 by the Hong Kong and Shanghai banking Corporation to act as a group holding company.
Silicon Valley Bank is the nation’s 16th-largest bank. It was the second biggest bank failure in US history after the collapse of Washington Mutual in 2008. The bank served mostly technology workers and venture capital-backed companies, including some of the industry’s best-known brands.
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Yellen described rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.
“The problems with the tech sector aren’t at the heart of the problems at this bank,” she said.
Yellen said she expected regulators to consider “a wide range of available options”, including the acquisition of Silicon Valley Bank by another institution. So far, however, no buyer has stepped forward.
Tom Quaadman, executive vice-president of the US Chamber of Commerce’s Center for Capital Markets Competitiveness, said in a statement that “we urge the administration to facilitate a quick acquisition, guaranteeing all bank depositors have access to their cash”.
Regulators seized the bank’s assets on Friday. Deposits that are insured by the federal government are supposed to be available by Monday morning.
“I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said. “I can’t really provide further details at this time.”
Collapse of Silicon Valley Bank rocks China’s tech start-ups, VC industry
Newsom said the goal was to “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”.
