The implosion of Silicon Valley Bank, which became the second-largest bank failure in U.S. history on Friday, sent shock waves through the country’s financial system. Now, its ripple effects are being felt across the world.
However, foreign regulators are still looking into potential fallout in their economies, and some are beginning to act. The British government and the Bank of England helped facilitate HSBC’s takeover of SVB UK for just over $1 on Monday.
SVB which lent heavily to start-ups and tech companies, had branches in eight other countries, including China, India and Israel, according to its website.
Y Combinator, an American tech accelerator that has funded hundreds of companies worldwide, said in a petition addressed to Treasury Secretary Janet L. Yellen that many of the start-ups it backs used SVB as their sole bank, and that its collapse could lead to thousands of job losses.
Here are some of the countries dealing with the fallout:
Canadian regulators announced a temporary takeover Monday of the assets of the local SVB branch. The Office of the Superintendent of Financial Institutions said in a statement that it intends to seek permanent control of the bank’s assets and has applied for a winding-up order to be issued by the attorney general.
The bank had a branch in Toronto and lent primarily to corporate clients, the statement said.
Taking over temporary control of the bank was meant to “protect the rights and interests of the branch’s creditors,” Peter Routledge, the superintendent of financial institutions, said in the statement. “I want to be clear: the Silicon Valley Bank branch in Canada does not take deposits from Canadians, and this situation is the result of circumstances particular to Silicon Valley Bank in the United States.”
AcuityAds, a company headquartered in Toronto, said in a statement Monday that it holds approximately $55 million in cash deposits with SVB. It halted the trading of securities on Friday, the day of the bank collapse.
The junior minister for skill development and entrepreneurship, Rajeev Chandrasekhar, held a virtual meeting Tuesday with hundreds of start-ups and funds that might be affected. He said the ministry will recommend that India’s central bank make it easier for domestic banks to extend credit services to Indian start-ups working in the United States. The government will help them “navigate this storm,” he said in a text message.
Many Indian business founders signed the petition by Y Combinator asking to protect jobs and restore stronger regulatory oversight for regional banks. Forty Indian start-ups backed by Y Combinator had at least $250,000 in deposits with SVB, and more than 20 firms had deposits of over $1 million, India’s Economic Times reported.
In India, early-stage start-ups focused on U.S. markets are most affected, said Ashish Dave, CEO of the Mirae Asset venture investments firm. “There was too much uncertainty on Friday, but with the Fed action, the risk has gone down,” he said by telephone. “We need to see how and when the founders are able to access their capital, which is stuck.”
The most visible impact was felt by mobile gaming company Nazara Technologies, whose shares fell to a record low, according to the Business Standard newspaper, after slipping 7 percent Monday. Two of its subsidiaries held about $7.7 million in cash at SVB, the report said, adding that the company did not expect any impact on its day-to-day operations or growth plans.
Alecta, a Swedish pension fund and one of the biggest investors on the country’s stock market, had investments in SVB and Signature Bank, another institution that collapsed over the weekend, to the tune of more than $1 billion, the company said in a statement Monday. It was the bank’s fourth-largest shareholder, a Bloomberg News analysis found.
“The impact on the future pension payments of our clients is very small.” Jacob Lapidus, a spokesman for Alecta, said in an email.
The country’s financial regulator said Monday that SVB’s collapse does not threaten its financial stability. The agency said in a statement that is in contact with Alecta, local banks and companies to study their exposure to risk.
German regulators banned SVB’s local branch Monday from making withdrawals and payments. BaFin, the financial authority, said in a statement that the bank was at risk of not being able to meet its obligations, but added that it posed no threat to financial stability. The total assets of the bank in Germany amounted to just over 789 million euros, or about $844 million, and it has done business in the country since 2018, the statement said.
Prime Minister Benjamin Netanyahu said Sunday in a tweet that he was closely following developments and that Israel would take steps to help the liquidity crunch that companies might face.
Finance Minister Bezalel Smotrich said on Twitter that he would form a committee, including representatives from the central bank and securities regulator, to examine the impact on the economy. The country, he said, would help the industry weather the crisis.