SVB reopens under FDIC regulations, professionals harps on risk management
By Oghale Mafuru
The Silicon Valley Bank, SVB, one of the largest banks in the United States which has been a bank of choice for most start-ups and venture capitalist was recently shut down following a bank run, after the bank announced a loss of $1.8billion in its latest investments.
In a bid to protect insured depositors, the Federal Deposit Insurance Corporation (FDIC) in a statement announced that all insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023 as SVB’s branch offices will also reopen under the control of the regulator.
“The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.
“As of December 31, 2022, Silicon Valley Bank had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers” it said.
The regulator said it will pay uninsured depositors an advanced dividend within the next week, with potential additional dividend payments as the regulator sells SVB’s assets.
The FDIC’s standard insurance covers up to $250,000 per depositor, per bank, for each account ownership category.
Commenting on this, Ham Serunjogi -Co-Founder & CEO, Clipper Cash, a leading fintech company stated that the Silicon Valley Bank had contributed immensely to the growth and financial success of many tech start-ups and it had made other investments aside SVB.
“SVB has been the most important banking partner to the entire Silicon Valley ecosystem; and for us at Chipper they have been incredible partners as investors. A little-known fact is that 5 years ago when I was trying to open Chipper’s first bank account, SVB was the only bank that would accept us. I know there are countless other startups all doing very important work who would say the same thing. Therefore, it is quite sad to see such a pillar of our ecosystem brought to its knees”.
For his part, Mehmet Beyaz, CTO-OSS product development, TTG INT LTD stressed the need for start-ups to have varied investment portfolios to mitigate risks.
He said: “It’s encouraging to see that the US regulators have stepped in to bail out SVB customers and allow account holders to withdraw their money. However, this incident highlights the need for startups and individuals to have contingency plans in place in case of unforeseen circumstances.
“Diversifying marketing channels, training more employees, and diversifying customer bases can help reduce the risks associated with relying on a single point of failure. This incident is a wake-up call for startups and individuals to re-evaluate their risk management strategies.”
Maelle Gavet, CEO at Techstars urged entrepreneurs to do a risk assessment of the situation by creating different scenarios and plan appropriate responses to mitigate its adverse impact while prioritizing cash optimization and employee management.
“Figure out which payments you can postpone, and how you can be paid faster. Often that means picking up the phone, and asking for payment today. You can even offer clients a sweetener of a five or 10% discount for an advance on payment (where applicable). Do everything in your power to meet payroll, not just because there’s a legal and moral imperative, but you could risk your business if you don’t.
She urged them to have alternative bank accounts as well as ensure continued communication with shareholders.
“If you don’t keep them informed, especially when there’s a major development, the rumor mill will take over” she said.
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