The newly-appointed Chief Executive Officer (CEO) of Silicon Valley Bank (SVB), Tim Mayopoulos, has written a letter to clients assuring them that their money is safe and accessible and the bank is “open and conducting business as usual”.
On Monday, the Federal Deposit Insurance Corporation (FDIC) appointed Mayopoulos as the CEO of the newly-created bridge bank, Silicon Valley Bank. It also transferred all insured and uninsured deposits and all assets of the erstwhile bank to the newly created entity.
“A bridge bank is a chartered national bank that operates under a board appointed by the FDIC. It assumes the deposits and certain other liabilities and purchases certain assets of a failed bank,” said FDIC. “The bridge bank structure is designed to ‘bridge’ the gap between the failure of a bank and the time when the FDIC can stabilise the institution and implement an orderly resolution.”
“Depositors have full access to their money and new and existing deposits are protected,” wrote Mayopoulos, in his over-400-words note to clients.
He also wrote that the wire payments that were entered on March 9 or 10 that were not processed were cancelled and that customers need to re-initiate them if needed.
Mayopoulos, who is yet to update his LinkedIn profile, was the President of Blend, a Silicon Valley technology company. Prior to his Blend stint, he was President and CEO of US-government-sponsored enterprise The Federal National Mortgage Association (commonly known as Fannie Mae). The 64-year-old is also a lawyer.
“I look forward to getting to know the clients of Silicon Valley Bank. I come to this role with humility. I also come to this role with experience in these kinds of situations,” he wrote.
Mayopoulos said he was part of the new leadership team that joined Fannie Mae during the financial crisis that unfolded in 2008-09 and stayed on as the CEO for around seven years.
“I am very proud of (the) work we did there to restore the company to profitability and to stabilise the housing finance system in a period of unprecedented challenge,” he said.
SVB was closed by the California Department of Financial Protection and Innovation, and FDIC was named as the receiver. This is the second biggest banking failure in the United States that left a lot of startups and venture-backed firms, especially in the tech sector, reeling and scrambling for options during the weekend.
For some of them, SVB was their sole banker with all their funds locked in and no sight of what would happen next. The speedy resolution has been welcomed by the bank’s clients who have been lining up to withdraw their funds and transfer them to their alternative or newly-opened bank accounts.
A founder, who did not wish to be named, said his startup had 100% of its funds in SVB and that it has transferred all the funds to two to three different accounts.
“I don’t think we are out of the woods yet. I think there are ripple effects,” said the founder quoted above, referring to the fall of Signature Bank and the sliding share prices of First Republic Bank and Comerica Bank on contagion fears.
“I think it’s an evolving situation and it will have an impact on the general morale, investor appetite, venture debt ecosystem, etc. I think there are more far-reaching implications as well,” he said.
HSBC Holdings said on Monday that its UK ring-fenced subsidiary, HSBC UK Bank, is acquiring Silicon Valley Bank UK Limited for £1 (around Rs 90). Regulators are planning to make another attempt at auctioning the collapsed SVB after they failed to find a buyer over the weekend, according to a report by the Wall Street Journal, based on unnamed sources.
