Australian and New Zealand technology companies that have cash deposited with collapsed San Francisco-based Silicon Valley Bank (SVB) will not lose their deposits following intervention by the US Federal Government.
The Federal Deposit Insurance Corporation (FDIC) guarantees protection of deposits up to $US250,000 but many businesses had much larger deposits with SVB and there had been concerns that losses would result in technology businesses being unable to pay staff.
Reuters reported on 13 March that the boards of the FDIC and the Federal Reserve, in consultation with President Joe Biden, had approved FDIC’s measures to address the collapse of Silicon Valley Bank that had followed a run of withdrawals. The measures were announced in a joint statement by US Treasury Secretary Janet Yellen, Federal Reserve chair Jerome Powell and the FDIC on Sunday evening (12 March) US time.
The statement said: “Today we are taking decisive actions to protect the US economy by strengthening public confidence in our banking system. This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable growth.”
Meanwhile, the Federal Reserved also said it would make additional funding available through a new Bank Term Funding Program which would offer loans of up to a year to depositary institutions backed by US Treasury bonds and other assets these institutions hold.
A second US lender, Signature Bank of New York was closed on Sunday by the State of New York’s financial regulator which said depositors would be made whole at no cost to taxpayers. Signature’s shareholders and unsecured debtors will not be protected. The regulator has removed the bank’s management.
Whispir (ASX: WSP) is one Australian technology company that has confirmed it has been affected by the SVB collapse.
The company said it had $US173,679 ($261,870) on deposit with SVB which it expected to be able to recover in full through the FDIC guarantee “in coming days”.
“The company has a diverse portfolio of deposits across several leading banks in order to reduce exposure,” Whispir said.
San Francisco-based tech sector lender Partners for Growth, which has a Sydney office and has lent to many local tech cvompanies, has had a close relationship with SVB for more than 30 years.
Sydney-based president Jason Georgatos said: “The current situation does not impact PFG’s ability to lend – PFG has always been an independent entity, not owned by SVB. We will continue to lend to growing technology companies and support entrepreneurs globally.”
PFG’s loan funds are structured similarly to venture funds with capital committed by limited partner investors and available to be called as needed.
SVB was a limited partner investor in PFG’s first two funds but is now only a strategic partner. PFG is currently investing from its sixth and seventh funds, with capital raising continuing for Fund 7.
The firm’s limited partners are today a wide range of mainly US institutional investors such as pension funds and endowments.
Georgatos started his career at SVB and said he felt for his colleagues at the bank who he regarded as professional and highly dedicated. He hoped SVB would be taken over by a larger institution that would enable it to continue to provide valuable support the global tech sector.