Regulators failed last weekend to find a solution for Silicon Valley Bank (SVB) to be bought out. The bankrupt bank’s custodians met Monday morning without any announcement on the subject, but with good news: the government has embarked on a bailout planand takes responsibility for giving custodians back access to their funds.
No buyer yet, and an establishment placed under guardianship, categorized as “systemic”, whose customer deposits, evaporated by the collapse of the bank, are artificially back thanks to the State. The time has come to step up the pace and seek a compromise – a plan B. A new auction is on the way.
The government’s choice to come to the aid of the bank and its customers has been judged as a “treason” and as “a loss of financial discipline” by the most liberal. But then, who will continue to take care of them? Who will repay the loans contracted by the Federal Reserve (FED)?
Unsurprisingly, the interested parties are rare and we do not push ourselves to win the bet. The bank may have been the 16th largest in the United States, but it focuses on a specific sector (tech) and companies dependent on venture capital, in a more delicate dynamic in 2023. For the moment, no large bank did not submit an offer.
The second auction is coming
The Federal Deposit Insurance Corp (FDIC) has regained control of Silicon Valley Bank and is now responsible for organizing an auction session. Last Sunday, however, it ended in failure. It could be that the plan is now to go and target several buyers, who will distribute the assets of the establishment according to their shares, during a second sale.
The Wall Street Journalwho obtained the notes from the FDIC briefing to the Senate on the subject, nevertheless said that the date of the next auction was unclear.
In the UK, HSBC has taken over the local subsidiary of SVB, which will allow local customers to regain access to their funds. Who will take the hit on the American side? On site, where the establishment has the bulk of its customers (thousands of startups and investment funds).
Without access to their funds last weekend, an entire generation of startups risked filing for bankruptcy. Without access to their funds, they find themselves unable to pay their employees, survive until they become profitable, and invest.
It only remains to wait to find out when the second phase of the sale will be organized, and if buyers will show interest now. Before its collapse, Silicon Valley Bank had many shareholders including The Vanguard Group (10.9% share), SSgA Funds Management (5.22%) but also JP Morgan (3.67%) and BlackRock (2.27%). %).
Since 2008 and the crisis of subprime, no bank default had occurred. Fears of contagion are high, especially since the rise in rates and the lack of liquidity in the coffers of banks have also wiped out Silvergate Bank and Signature Bank.
