NEW YORK (AP) — The collapse of Silicon Valley Bank has sent ripples of distress across the globe. From California wine country to London startups, companies are scrambling to adjust their finances in the wake of the unexpected closure. This has resulted in financial concerns for businesses and their employees, prompting officials to reach out to the White House for help.
The Federal Deposit Insurance Corp. is offering insurance for customers who have less than $250,000 in the bank, while regulators are looking for a buyer to help those with higher amounts. Meanwhile, the Bank of England announced that it will handle Silicon Valley Bank UK’s insolvency procedure and pay out eligible depositors up to 170,000 British pounds ($204,544).
The shutdown has had a major effect on the California wine industry. Since the 1990s, Silicon Valley Bank has been a major lender to vineyards, and the sudden disappearance of the bank could have an impact on small vintners who may have difficulty getting lines of credit to plant new vines. Winemaker Jasmine Hirsch said it is “a huge disappointment” and expressed concern for the broader effects.
Tech startups have also been affected. Shelf Engine CEO Stefan Kalb has every single penny of his firm’s money in Silicon Valley Bank, and the deposit amount is now tied up in the chaos. 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. This could force him into a decision about whether to begin furloughing employees until the mess is cleaned up.
Other companies have been able to switch over their payroll and vendor payments to other banks, but some venture capital investors have urged their partners to withdraw their funds “immediately” and this has only accelerated the flight of cash which has led to the bank’s collapse. Furthermore, some have unfairly tied the failure to doubts about cryptocurrency ventures.
Argentinian entrepreneur Martín Varsavsky, who has investments across the tech industry and Silicon Valley, believes the U.S. government needs to act swiftly to prevent further harm. One of his companies, Overture Life, had some $1.5 million in deposits in the bank but can rely on other holdings elsewhere to meet payroll.
Andrew Alexander, a calculus teacher at a private San Francisco high school that uses Silicon Valley Bank, is confident that many of the issues can be resolved before his next paycheck in two weeks. However, he is worried for friends whose livelihoods are more deeply intertwined with the tech industry and Silicon Valley.
The global financial crisis has been a brutal day for many, and it is essential that the government take action to protect jobs and people’s livelihoods. AP writers Matt O’Brien, Michael Liedtke and Alex Veiga contributed.
