The recently defunct Silicon Valley Bank has an exposure of 10-20 basis points to TCS, Infosys and smaller rival LTIMIndtree.
SVB Financial Group was previously exploring bankruptcy protection as an option to sell off assets comprising its investment bank and venture capital business.
Silicon Valley Bank, which collapsed last week even as the lender’s shares fell as much as 60 percent in a day, has now officially filed for bankruptcy. Its parent SVB Financial Group had previously been seeking bankruptcy protection, including investment banks and venture capital businesses, as an alternative to selling assets.
SVB Financial Group, which was seized by the US last week, is filing for Chapter 11 bankruptcy protection. SVB Financial Group is no longer affiliated with Silicon Valley Bank after being seized by the Federal Deposit Insurance Corporation.
The bank’s successor, Silicon Valley Bridge Bank, continues to be operated under the jurisdiction of the FDIC and is not included in the Chapter 11 filing. SVB Financial Group believes it has liquidity of around $2.2 billion.
The collapse of Silicon Valley Bank, also known as SVB, is being called the biggest bank failure since the 2008 Washington Mutual crisis or the global financial crisis. It was the 16th largest lender in the US and the go-to bank for many startups around the world.
The bank failed after clients – many of them venture capital firms and VC-backed companies that the bank had cultivated over time – began withdrawing their deposits to make a run on the bank. SVB’s collapse prompted investors to speculate that the Fed would now hesitate to hike interest rates this month by a super-size of 50 basis points.
On 8 March, SVB announced that it had sold $21 billion of securities from its portfolio at a loss of $1.8 billion. The group was selling shares worth $2.25 billion to raise the finance, which included US Treasuries and mortgage-backed securities.
Crypto-based lender Silvergate announced plans to cease operations and facilitate liquidation due to huge losses following the collapse of crypto exchange FTX, which led to an increase in withdrawals from SVB.
As of March 9, a regulatory filing shows that SVB has a negative cash balance of $958 million. SVB shares fell 41 percent, the biggest drop since 1998. “Despite the bank’s financial health prior to March 9, investors and depositors reacted by withdrawing deposits of $42 billion, putting pressure on the bank.”
Later, on March 10, the US Federal Deposit Insurance Corporation (FDIC) announced that SVB was “closed today by the California Department of Protection and Innovation, which appointed the FDIC as receiver”.
Top Indian IT firms Tata Consultancy Services and Infosys have the highest exposure among regional banks in the United States, which are grappling with financial turmoil, JP Morgan analysts said on Friday.
Regional banks account for 2-3 per cent of their revenue in the United States, JP Morgan said in a note, adding that the recently collapsed Silicon Valley bank risks TCS, Infosys and smaller rival LTIMIndtree a 10- Could be 20 basis points. , led by the Tata group company.
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