Silicon Valley Bank collapses in biggest failure since 2008

The Ireland Strategic Investment Fund says the State's $100m investment will not be impacted

Silicon Valley Bank headquarters in Santa Clara, California. SVB Financial Group bonds are plunging alongside its shares after the company moved to shore up capital after losses on its securities portfolio and a slowdown in funding Picture: David Paul Morris/Bloomberg

The Ireland Strategic Investment Fund (ISIF) said it does not expect any negative impact on the State’s $100m (€93.9m) investment in five funds managed by a subsidiary of the SVB Financial Group.

It comes after Silicon Valley Bank became the biggest US bank failure in more than a decade, after its long-established customer base of tech startups grew worried and pulled their deposits.

The move by California state regulators today to take possession of the lender and appoint the Federal Deposit Insurance Corporation (FDIC) as receiver caps a vicious fall for a Silicon Valley stalwart. It’s also the second regional lender to fold this week after Silvergate Capital announced it was voluntarily liquidating its bank, spurring a selloff in bank stocks and concerns that more firms might be headed for closure.

The FDIC said that insured depositors would have access to their funds by no later than Monday morning. Uninsured depositors will get a receivership certificate for the remaining amount of their uninsured funds, the regulator said, adding that it doesn’t yet know the amount.

Announcing the takeover, the California Department of Financial Protection and Innovation cited inadequate liquidity and insolvency.

Problems mounted for the bank, known as SVB, after Peter Thiel’s Founders Fund and other high-profile venture capital firms advised their portfolio companies to pull money from the bank.

The calls followed parent company SVB Financial Group announcing that it would try to raise more than $2bn after a significant loss on its portfolio.

The failure of the bank has led to concern about contagion and a wider impact. Sweden’s largest pension group was SVB’s fourth-biggest shareholder at the end of last year.

In a statement to the Irish Examiner, the ISIF said that, as of the end of February it had approximately $100m invested in five investment funds that are managed by SVB Capital, a subsidiary of the SVB Financial Group.

“ISIF has structured these investments in a manner that legally ring-fences them from the rest of the SVB Financial Group,” a spokesperson said. “This means ISIF does not expect any impact on these investments arising from SVB Financial Group’s announcement that it will issue additional shares in the group.”

"The distributions received by ISIF from these investments since 2012 exceed the amount currently invested," the spokesperson said.

In parallel with ISIF investing in these funds, SVB Financial Group’s banking subsidiary (Silicon Valley Bank) provided finance to a number of Irish technology businesses.

European shares slid to a seven-week low yesterday as financial stocks led a broader market rout over the woes of SVB. The pan-European STOXX 600 index closed the day 1.4% lower and the week down 2.3%, its steepest weekly fall so far this year.

Shares in AIB, Bank of Ireland, and Permanent TSB were down by more than 3% today.