Silicon Valley Bank: Sigh of relief

After the US deposit insurance fund FDIC took control of Silicon Valley Bank, nervousness was high in the Swiss start-up ecosystem. On Monday, President Biden declared that the deposits are fully protected. At the same time a bridge bank - the National Bank of Santa Clara - was founded which took over the activities of the collapsed Silicon Valley Bank. The Federal Deposit Insurance Corporation (FDIC) transferred all deposits—both insured and uninsured—and substantially all assets of the former Silicon Valley Bank to this newly created, full-service FDIC-operated bridge bank in an action designed to protect all depositors of Silicon Valley Bank.

Depositors will have full access to their money beginning this morning, when the bridge bank, opens and resumes normal banking hours and activities, including online banking. Depositors and borrowers will automatically become customers of the National Bank of Santa Clara and will have customer service and access to their funds by ATM, debit cards, and writing checks in the same manner as before. Silicon Valley Bank’s official checks will continue to clear.  Loan customers should continue making loan payments as usual. 

In the FDIC's statement on Monday, all depositors are explicitly addressed, whereas on Sunday only insured assets - i.e. assets up to $250k - were mentioned as being accessible without restriction.

"In my opinion, the matter is settled now," says Thomas Dübendorfer, President of the Angel Investor Club SICTIC. He had been following the situation closely, as some of his portfolio companies had been clients of Silicon Valley Bank.

For startups, Dübendorfer says there is an important lesson to be learned from the collapse of Silicon Valley Bank. "Companies should never have just one account at one bank."

This means that the deposits of startups and investors should no longer be at risk. What remains are systemic risks.The high number of startups and investors affected shows that Silicon Valley Bank was an important part of the infrastructure of the US ecosystem. This role must now be taken over by other banks.

VC fundraising could also be affected by the collapse. Potential investors could be deterred because the venture market has obviously not yet adjusted to the new conditions with higher interest rates and political uncertainties. Potential clients of start-ups could also be deterred. The collapse of the bank and the global consequences once again demonstrate that startups are exposed to greater risks than traditional SMEs.