Silicon Valley Bank became the biggest US lender to fail in more than a decade, creating fears of contagion in tech and finance sectors in the US and around the world.
(Bloomberg) — Silicon Valley Bank became the biggest US lender to fail in more than a decade, creating fears of contagion in tech and finance sectors in the US and around the world.
US regulators took extraordinary measures to shore up confidence in the financial system, part of a frantic weekend that saw the surprise closure of New York’s Signature Bank along with mounting concerns about spillover effects to other regional lenders and the wider economy.
On Monday, the UK moved quickly to stem fallout by selling SVB’s British unit to HSBC Holdings Plc for £1. Elsewhere companies were tallying up their exposure, with most reassuring investors that the risk was manageable.
But the positive effect from the overnight support by US regulators quickly evaporated, with stocks signaling that fallout from the incident is far from over. The selloff extended to emerging-market assets. Stocks from the Middle East to Africa and Latin America tumbled toward their lowest levels this year.
Here’s a roundup of how companies, investors and governments are responding:
US
Treasury Department, Federal Reserve and FDIC: In an effort to avert a broader crisis, US authorities introduced a new backstop for banks that Federal Reserve officials said was big enough to protect the entire nation’s deposits. The FDIC said it will resolve SVB in a way that that “fully protects all depositors.” The Fed also announced a new “Bank Term Funding Program” that offers one-year loans to banks under easier terms than it typically provides. $25 billion is available.
First Republic Bank: The California-based lender fell a record 78% after it moved to try and quell concern about its liquidity. The declines came after the bank said in a statement late Sunday that it had more than $70 billion in unused liquidity to fund operations from agreements that included the Federal Reserve and JPMorgan Chase & Co.
Charles Schwab Corp.: The online brokerage tumbled the most ever on an intraday-basis as it sought to reassure investors that it has sufficient liquidity to handle any volatility following the collapse of SVB.
Khosla Ventures: The Menlo Park-based venture capital firm sent an email to founders saying that it would step in and cover payroll for some of its portfolio companies if they had shortfalls because of funds tied up with SVB.
Astra Space Inc.: The spacetech company is seeking new financial partners. About 15% of Astra’s cash, equivalents and marketable securities were with the bank as of March 10 and it’s unclear how the collapse will affect its ability to access cash or whether it will impact letters of credit securing its security deposit obligations to landlords.
UK
HSBC: The London-listed lender bought SVB’s UK unit in a deal that completed immediately and was funded from existing resources. “This acquisition makes excellent strategic sense for our business in the UK,” Chief Executive Officer Noel Quinn said in the statement.
Polarean Imaging Plc: The medical-imaging firm requested its shares be temporarily suspended while it seeks clarification on next steps, adding that it has “sufficient cash outside of SVB to meet its immediate liquidity needs.”
Trustpilot Group Plc: said SVB UK was its principal banking partner, but added it has other banking relationships that will let it continue ordinary business. Syncona and Learning Technologies also shared details of their relationships with SVB.
Naked Wines Plc: The wine distributor said it had a $60 million asset-backed credit facility, syndicated 50-50 between SVB and Bridge Bank. It’s engaged in discussions with Bridge Bank and has started looking for new financial partners.
Venture Life Group Plc: The consumer health company said it has a £30 million revolving credit facility with SVB and Santander. It has started discussions for Santander to take over SVB’s portion.
Sweden
Alecta: Sweden’s biggest pension fund is set to lose as much as $1.1 billion on bets it made in banks caught up in the collapse of SVB. The investor held a crisis meeting early on Monday to discuss why it had invested $2 billion in Signature Bank, First Republic Bank and SVB. Sweden’s financial watchdog summoned Alecta and other financial firms to discuss the crisis, but the Financial Supervisory Authority said the Nordic nation’s financial system has “significant resilience” and can navigate the current turbulence.
Japan
SoftBank Group Corp.: The group is seen as potentially one of the most exposed firms given its huge investments in technology. Startups in which SoftBank Vision Fund has invested have deposits and loans with SVB. There are concerns they could be hard pressed for cash flow due to the collapse.
Sumitomo Mitsui Trust Holdings Inc.: The Japanese asset manager had 0.29% stake in SBV Financial Group as of the end of last year’s fourth quarter.
China
Shanghai Pudong Development Bank Co.: The state-owned Chinese lender owns a banking venture with SVB and sought to calm local clients by reminding them that operations have been independent. SPD Silicon Valley Bank said in a statement it has always operated in a stable manner in accordance with Chinese laws and regulations and has an independent balance sheet. The venture was founded in 2012 as the first tech-focused bank in China, and serves science and innovation enterprises.
Andon Health Co.: The firm and its units had deposited about 5% of their cash and financial assets at SVB as of March 10, according to a statement to the Shenzhen stock exchange.
Netherlands
Pharming Group NV: The Dutch biotech said it holds $26 million in SVB US and $19 million in SVB UK. While most of the money is uninsured, the company said it’s confident its exposure won’t materially impact operating plans or convertible debt service obligations. The stock fell as much as 8.4% on Monday.
Germany
BaFin: The German financial regulator froze SVB’s branch in the country, which will not be allowed to sell assets or make payments. The regulator said the unit is at risk of not being able to fulfill commitments to creditors, BaFin said in a statement on Monday. The bank also has to close its client business. The German operations don’t pose a danger to financial stability, BaFin said.
Denmark
Zealand Pharma A/S: The Danish drug developer had about 163 million kroner ($23.5 million) at SVB as of March 10, or about 15% of its total cash, cash equivalents and marketable securities on that date. It expects to recover all of its deposits held at the now-closed Silicon Valley Bank.
Norway
Norges Bank Investment Management: Norway’s $1.3 trillion sovereign wealth fund said it expects to claw some money back related to credit exposure, though it is “premature to say how much.” The fund said it also had shares in Signature Bank and First Republic.
Hong Kong
Brii Biosciences Ltd.: The biotech company said less than 9% of its total cash and bank balances were held at SVB as of Feb. 28. It’s working closely with SVB and the FDIC to monitor updates of the incident and minimize any potential impact.
Broncus Holding Corp.: The medical services company said about $11.8 million, or about 6.5% of its cash and cash equivalents, was deposited at SVB as of March 10. “The company is actively working towards preserving and recovering its deposits at SVB,” it said in a filing.
BeiGene Ltd.: The biopharmaceutical firm said its uninsured cash deposits held at SVB represented 3.9% of its total cash and cash equivalents as of Dec. 31. “The company does not expect the recent developments with SVB to significantly impact its operations.”
Australia
Xero Ltd.: The accounting-software provider said its total exposure to SVB was about $5 million as of March 10.
SiteMinder Ltd.: The software maker said it had cash holdings of as much as A$10 million ($6.6 million) exposure to SVB and SVB UK, including anticipated payments from customers and partners.
India
Nazara Technologies Ltd.: The game developer said two units indirectly related to the company held about $7.8 million in cash balances at SVB.
–With assistance from Kurt Schussler, Ashutosh Joshi, Rafaela Lindeberg, Jonas Ekblom, Christian Wienberg, Kari Lundgren, Charlotte Yang, Georgina Mckay and Youkyung Lee.
(Updates with emerging markets details, additional items in US)
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