BaFin Takes Action Against Silicon Valley Bank Germany Branch

The German Federal
Financial Supervisory Authority, BaFin, Joins the lengthening list of financial
institutions that have presented their position concerning <a href=”https://www.financemagnates.com/cryptocurrency/svb-crisis-circle-escapes-usdc-depeg-with-regulatory-assurance/” target=”_blank” rel=”follow”>the collapse of
Silicon Valley Bank (SVB).
</a>The local
branch of the bankrupt institution, Silicon Valley Bank Germany Branch, was
banned from continuing to provide services due to the high risk of being unable
to repay debts to lenders in the near future.BaFin Orders German SVB to CloseAccording
to the regulatory statement published on Monday, BaFin has forced the financial
institution to close for business with its current customers with an immediate
effect. However, the supervisor admitted that the decision regarding the ban
and cessation of further operations in Germany was not final.Silicon
Valley Bank Germany Branch has been operating since 2018 and provides lending
services to local consumers but does not provide deposit services. BaFin believes
that the branch is not systemically important and its potential failure would
not risk undermining the financial stability of the local monetary system. ”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,” BaFin noted in a statement.Earlier on
Monday, the British <a href=”https://www.financemagnates.com/terms/f/financial-conduct-authority-fca/” class=”terms__main-term” id=”4c85a54d-15e0-4e44-a214-8c55f71cb286″ target=”_blank”>Financial Conduct Authority (FCA</a>) presented its own
statement regarding SVB UK’s branch announcing that it is working closely with
the Bank of England, the Government and other regulators to ensure safe passage
through the collapse of SVB. Despite the recent developments, SVBUK retains its
authorization from both the PRA and FCA and will continue to operate normally.The FCA has
also agreed to <a href=”https://www.financemagnates.com/institutional-forex/uk-silicon-valley-bank-sold-for-just-one-pound-to-hsbc/” target=”_blank” rel=”follow”>SVB’s UK branch takeover by HSBC’s domestic operating division</a>.
The transaction was made at a symbolic £1.SVB Triggers Market TurmoilThe
customer base of SVB was close-knit, mostly tech companies. Some of these
customers started to pull out their money from the bank, starting a feedback
loop. Deposits in the bank went down from $198 billion at the end of March 2022
to $165 billion by the end of February 2023, which is a drop of 16 percent. In
other words, it was a ‘bank run’ and caused the bank to fail.In response
to the problems of the institutions, the US Federal Deposit Insurance
Corporation (FDIC) released a statement on 10 March 2023 outlining its plans to
safeguard depositors who had invested in Silicon Valley Bank.BaFin
decided to temporarily halt operations at Bafion Silicon Valley Bank Germany
Branch to ensure the proper handling of assets. These protective measures will
remain in effect until the FDIC makes determinations about the business
operations of Silicon Valley Bank, which have been transferred under its
authority.The
consequences of the fallout are significant for the technology industry, given
the bank’s exclusive focus on that sector. Circle, the stablecoin issuer, <a href=”https://www.financemagnates.com/cryptocurrency/svb-crisis-circle-escapes-usdc-depeg-with-regulatory-assurance/” target=”_blank” rel=”follow”>held
$3.3 billion</a>, or 8 percent of the funds supporting the USDC, at Silicon Valley
Bank.In addition
to Circle, several notable depositors were impacted by the ban. These included
Roku, with $487 million, BlockFi, which had recently filed for <a href=”https://www.financemagnates.com/terms/b/bankruptcy/” class=”terms__secondary-term” id=”41b3ef0d-d805-441d-8443-121890264e94″ target=”_blank”>bankruptcy</a>, with
$227 million, and Roblox, with $150 million, among others. On the other hand, a
number of cryptocurrency firms, such as Binance, Tether, Paxos, and Gemini,
have stated that they do not have any investments tied to the now-failed
Silicon Valley Bank.The
collapse of the SVB also led to panic in the traditional stock market,
particularly bank shares. <a href=”https://www.financemagnates.com/institutional-forex/credit-suisse-shares-hit-all-time-low-following-silicon-valley-bank-collapse/” target=”_blank” rel=”follow”>Credit Suisse lost 11% on Monday</a> morning and fell to
historic lows. By contrast, the Dow Jones benchmark tracking bank listings fell
to its lowest levels since October.