SVB resolution brings relief to startups, says IT Minister Ashwini Vaishnaw

• ByStartupStory     |    March 14, 2023

On Monday, IT Minister Ashwini Vaishnaw expressed relief as the US administration took steps to protect depositors of Silicon Valley Bank, stating that the SVB resolution is “reassuring” for startups. The Biden administration’s announcement that depositors of the failed bank can access their money from Monday is likely to provide much-needed relief.

Following a series of bank failures that raised concerns about the nation’s financial stability, US President Joe Biden has promised stricter bank regulation and sought to reassure Americans that they can trust the US banking system to be “safe”.

In the wake of the Silicon Valley Bank’s failure last week, causing anxiety and uncertainty among startups, tech companies, entrepreneurs, and VC funds, federal regulators have stepped in to support all deposits at the bank.

On Friday, the California Department of Financial Protection and Innovation shut down Silicon Valley Bank (SVB), the 16th largest bank in the US, and appointed the FDIC as its receiver.

 

As a popular bank for many high-flying startups in the tech ecosystem, Silicon Valley Bank’s sudden failure was a significant event, representing one of the largest bank collapses since the global financial crisis of 2008. The bank’s failure occurred due to the withdrawal of deposits by clients, including venture capital firms and VC-backed companies that had been cultivated by the bank over time, leading to a run on the bank.

Following recommendations from the Federal Reserve and the boards of the Federal Deposit Insurance Corporation (FDIC), and consultation with the President, US Treasury Secretary Janet Yellen authorised measures on Sunday that would allow the FDIC to resolve the Silicon Valley Bank (SVB), based in Santa Clara, California, in a way that provides complete protection for all depositors.

On Monday, the UK government revealed that it had aided London-based banking giant HSBC in acquiring the troubled UK division of Silicon Valley Bank for a nominal amount of 1 pound. The acquisition secures the deposits of over 3,000 customers valued at approximately 6.7 billion pounds.

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