Silicon Valley Bank Collapse Has Repercussions in Israel

Silicon Valley Bank (SVB)collapsed in what was described as the largest failure of a US bank since Washington Mutual in 2008. On Friday, the Federal government was forced to take over SVB and this is having repercussions in Israel where hundreds of firms are said to have deposits with the bank.

In the U.S., depositors are insured by the Federal FDIC program for up to $250,000. Federal authorities pledged that all such deposits will be secured and small depositors will get all of their money back, while it is working on how to disperse the bank’s funds to larger depositors. Some companies have hundreds of millions deposited in SVB. But investors who hold stock in the bank will lose a fortune.

Calcalist reported that Israeli venture capital funds held emergency discussions on Saturday to decide what to do now that SVB has failed.

Silicon Valley Bank has a Representative Office in Israel with a team based in Tel Aviv. SVB states it has been building relationships with entrepreneurs, venture capitalists and service providers in Israel for more than a decade and that, “with a deep knowledge and appreciation of the dynamic Israeli market, we developed a suite of services to accelerate growing companies’ success worldwide.”

The SVB Israel website at this time made no mention of the collapse, but David Cohen, General Manager of SVB Israel, stated on social media, “Over 12 years ago, I started my chapter at SVB with the aspiration to build a solid and trusted brand for SVB in Israel.”

“With amazing team work and hunger, we managed to convince the Israeli innovation ecosystem to trust us and the SVB platform as its true long-term partner,” he added. “It took us years of hard work to add client after client and to win loan after loan to position SVB as the “default” partner for our friends in the VC industry and to its portfolio companies.”

Prime Minister of Israel Benjamin Netanyahu said he is closely monitoring the collapse of Silicon Valley Bank, which has led to a major crisis in the high-tech world.

“If necessary,” he said, “out of responsibility to Israeli high-tech companies and employees, we will take steps to assist the Israeli companies, whose center of activity is in Israel, to weather the cash-flow crisis that has been created for them due to the turmoil.”

“The Israeli economy is strong and stable, which finds expression in this crisis as well.”

SVB released a statement Friday saying, “All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023. The FDIC will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of Silicon Valley Bank, future dividend payments may be made to uninsured depositors.”

Silicon Valley Bank had 17 branches in California and Massachusetts. The main office and all branches of Silicon Valley Bank will reopen on Monday, March 13, 2023. The DINB will maintain Silicon Valley Bank’s normal business hours. Banking activities will resume no later than Monday, March 13, including on-line banking and other services. Silicon Valley Bank’s official checks will continue to clear. Under the Federal Deposit Insurance Act, the FDIC may create a DINB to ensure that customers have continued access to their insured funds.

As of December 31, 2022, SVB had approximately $209.0 billion in total assets and about $175.4 billion in total deposits. At the time of closing, the amount of deposits in excess of the insurance limits was undetermined. The amount of uninsured deposits will be determined once the FDIC obtains additional information from the bank and customers.