The failure of Silicon Valley Bank (SVB) Friday has been a major shock to life sciences companies and the whole ecosystem in Michigan and across the United States. As the second largest bank failure in U.S. history, we know a number of MichBio’s member companies are directly affected by this concerning situation. Since Friday, MichBio has been monitoring the situation and is in contact with state and federal policymakers.
What We Know
This is an uncertain and evolving situation.
Early Sunday, Treasury Secretary Janet Yellen said there would be no federal bailout. However, later in the day Yellen, Federal Reserve Chair Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg issued a joint statement making clear that depositors will have access to all of their money today from SVB, not just the FDIC-insured limit of $250,000. The Federal Reserve will create a new Bank Term Funding Program (BTFP) to support liquidity. The statement also said that none of the costs of the intervention will be on customers or taxpayers, rather, losses to the Deposit Insurance Fund will be recouped by a special assessment on banks. Shareholders and unsecured debt holders will not be protected.
SVB senior management has been removed, and the Federal Reserve added it will make additional funding to eligible depository institutions to help assure they can meet depositor needs.
You can find reactions from House Financial Services Committee Chairman McHenry (R-NC) here, Senate Banking Committee Ranking Member Scott (R-SC) here, and a joint statement from Senate Banking Committee Chair Brown (D-OH) and House Financial Services Committee Ranking Member Waters (D-CA) here.
President Biden addressed the SVB collapse this morning.
The Treasury Department and the Federal Deposit Insurance Corp.’s top priority is to engineer a sale of the bank. House Speaker Kevin McCarthy (R-CA) said that he thinks it is “very possible” to find a buyer for SVB, which he believes would be the “best outcome to move forward and cool the markets.”
What’s Next?
MichBio is continuing to monitor the situation and if a deal is brokered for the sale of the bank. Treasury and the FDIC seem to have stabilized the situation now. We don’t expect quick legislative action from Congress, though there will likely be congressional hearings around the collapse in the future. We do want to note that this Thursday, Secretary Yellen will appear before the Senate Finance Committee at a previously scheduled hearing.
We’ll issue more bulletins as information becomes available.
Stephen Rapundalo, PhD - President and CEO, MichBio
UPDATE: on SVB Provided by the FDIC
This is a quick update to yesterday’s MichBio bulletin related to the failure of Silicon Valley Bank, the ensuing FDIC receivership, and the government’s decision to invoke the systemic risk exception.
The FDIC announced the creation of Silicon Valley Bridge Bank, N.A., a full-service FDIC-operated ‘bridge bank.’ All deposits, both insured and uninsured, were transferred to the bridge bank in a move that allowed depositors to have full access to their funds. According to the FDIC press release announcing the creation of the bridge bank, all banking services have resumed, including online banking and access to funds by ATM, debit cards, and writing checks. Direct deposits and autopay will continue to operate. Checks will continue to clear. Loan payments should be made as scheduled, though lines of credit or loans in progress remain uncertain.
Also, the Frequently Asked Questions on the FDIC website have been update and can be viewed at – https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/silicon-valley-faq.html
