SVB Financial Group, the former parent company of Silicon Valley Bank, has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.
The bank’s collapse comes amid the implosions of crypto-focused Silvergate Bank and Signature Bank.
While not as crypto-focused as those two firms, Silicon Valley Bank had some high-profile crypto customers, such as stablecoin issuer Circle Internet Financial and blockchain-based digital settlement provider Ripple.
On March 17, SVB Financial Group stated that its venture capital arm, SVB Capital, its broker-dealer SVB Securities, and funds of general partner entities will not be affected by the bankruptcy proceedings. These entities will continue their operations as usual, while SVB Financial Group explores strategic alternatives for its businesses.
SVB Financial Group made it clear that it is no longer associated with Silicon Valley Bank N.A. or its private banking and wealth management division, SVB Private.
The bank’s replacement, Silicon Valley Bridge Bank, N.A., is under the jurisdiction of the Federal Deposit Insurance Corporation (FDIC) and is not subject to the Chapter 11 filing.
SVB Financial Group has an estimated $2.2 billion in liquidity, along with other valuable investment securities accounts and assets that it is exploring strategic options for. Its funded debt is approximately $3.3 billion in unsecured notes that only impact SVB Financial Group, and it has $3.7 billion in preferred stock.
SVB Group intends to use the court-supervised process to assess strategic options for SVB Capital, SVB Securities, and other assets.
SVB Group’s chief restructuring officer, William Kosturos, emphasized that SVB Capital and SVB Securities will continue to function and serve clients, under their respective independent teams.
The ongoing crisis at SVB has caused uncertainty not only in traditional banking but also in some cryptocurrency markets.
After SVB’s operations were shut down on March 8, Circle, the operator of the major stablecoin USD Coin (USDC), had approximately 8% of its reserves, equivalent to $3.3 billion, tied to SVB.
This led to USDC briefly losing its peg, dropping to $0.87, and then recovering its peg following reports of SVB’s resolution.
The bankruptcy filing comes just days after HSBC announced that its subsidiary, HSBC UK Bank acquired Silicon Valley Bank UK for 1 British pound ($1.2).
According to HSBC Group CEO Noel Quinn, the acquisition made “excellent strategic sense” for HSBC’s business in the United Kingdom, strengthening its commercial banking franchise.
The bankruptcy filing underscores the challenges faced by banks in the crypto industry, which has been plagued by regulatory uncertainty, security risks, and market volatility.
As more banks venture into the crypto space, they will need to navigate these risks and ensure robust risk management frameworks to protect their customers and stakeholders.