BaFin Bans SVB From Doing Business in Germany

Aftershocks from the collapse of Silicon Valley Bank continue to be felt around the world.

For example, Germany’s financial regulator said Monday (March 13) that it had banned the bank’s arm in that country from operating, “as the institution is at risk of being unable to meet its obligations towards its creditors.”

BaFin, as the regulator is known, also ordered Silicon Valley Bank (SVB) Germany to be closed for business with customers. The order was one of several actions taken in recent days involving SVB, whose historic failure last week sent a panic through the banking, startup and venture capital world.

However, BaFin notes that SVB is not “systemically important” to the country’s economy.

“The distress of Silicon Valley Bank Germany Branch poses no threat to financial stability,” the regulator said. “According to the institution’s financial statements as at 31 December 2022, the total assets of the institution based in Frankfurt am Main amounted to 789.2 million euros.”

That statement was echoed Monday 6,000 miles away in Singapore, where that country’s financial regulator and central bank said it had limited exposure to SVB and Signature Bank, another financial institution that collapsed this weekend.

“The Singapore banking system has insignificant exposures to these failed banks in the US,” the Monetary Authority of Singapore (MAS) said in a news release. “Banks in Singapore are well-capitalized and conduct regular stress tests against interest rate and other risks.”

This weekend also saw the British government take action by putting SVB UK into an insolvency procedure to mute the impact of the failure and guard UK companies from major losses. And on Monday, British banking giant HSBC announced it would acquire SVB’s U.K. operations for a single pound.

As noted here Sunday (March 12), startups in countries where SVB does business — Germany among them — have pleaded with their governments to take action to shore up the bank.

But as PYMNTS Karen Webster writes, it was the venture capitalists (VCs) behind many of these startups that fueled the bank run that led to SVB’s demise. The bank had seen its deposit base almost triple between 2020 and 2022, from $60 billion to $175 billion.

“Flush with cash, VCs poured capital into startups with big ideas who found SVB much more eager to do business with them than traditional, risk-averse banks,” Webster writes. “In many cases, banking at SVB was part of the terms and conditions for getting loans. SVB claimed it banked 50% of U.S. startups, and no one doubts that it was the main bank for tech startups.”

To keep their investments safe, VCs sent a tidal wave of emails to companies in their portfolios last week, urging them to withdraw their funds from SVB. Some companies did that successfully, Webster wrote, while others spent the weekend worrying and waiting before U.S. regulators announced they would cover the bank’s depositors.