California Life Sciences releases statement on Silicon Valley Bank (SVB)Back
March 13, 2023
SOUTH SAN FRANCISCO, LOS ANGELES, SAN DIEGO, WASHINGTON D.C. —
The failure of Silicon Valley Bank (SVB) Friday has been a major shock to life sciences companies and the whole ecosystem in California and across the United States. As the second largest bank failure in U.S. history, we know many of CLS’s member companies are directly affected by this concerning situation. Since Friday, CLS has been monitoring the situation and is in contact with state and federal policymakers.
This is an uncertain and evolving situation, but here is what we know:
Early Sunday, Treasury Secretary Janet Yellen said there would be no federal bailout. A joint statement from Yellen, Federal Reserve Chair Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg later in the day did make it 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.
What caused the SVB collapse?
The bank had much of its money invested in long-term Treasuries and mortgage-backed securities that diminished in value as the Federal Reserve raised interest rates over the last year. As customers, including companies having difficulty getting loans, began withdrawing money, SVB started selling off investments at a major loss. Last week, SVB announced it needed to raise $2.25 billion to meet clients’ withdrawal needs and fund new lending, which plummeted the stock price and sparked withdrawals from customers. To ensure this is not repeated with other banks in similar situations, the BTFP will allow the banks to access loans with generous terms.
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.
What has happened today?
President Biden addressed the SVB collapse this morning.
California lawmakers were briefed Sunday that 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.” HSBC UK Bank has agreed to acquire the U.K. subsidiary of SVB for £1 ($1.21).
Governor Gavin Newsom also issued a statement yesterday.
We are monitoring how this week unfolds and if a deal is brokered for the sale of the bank. Treasury and the FDIC seem to have stabilized the situation at the moment. 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.
About California Life Sciences (CLS): California Life Sciences (CLS) is the state’s most influential and impactful life sciences membership organization, advocating for the sector and its diverse innovation pipeline. For more than 30 years, CLS has served the community by supporting companies of all sizes, from early-stage innovators and startups to established industry leaders in the fields of biotechnology, pharmaceuticals, and medical technology. CLS also works closely with universities, academic and research institutions, the investment community, and other critical partners that promote this vibrant sector. With offices in South San Francisco, San Diego, Sacramento, Los Angeles, and Washington DC, CLS works to shape public policy, improve access to breakthrough technologies, educate lawmakers, and advance equity within our ecosystem by championing innovative solutions for some of the most pressing challenges of our times. In doing so, CLS fulfills its mission to protect and nurture California’s life sciences industry, empowering discoveries that lead to healthier lives around the world.
California Life Sciences