The failure of Silicon Valley Bank (SVB) Friday has been a major shock to life sciences companies and the whole ecosystem in Georgia and across the United States. As the second largest bank failure in U.S. history, we know a number of CGHI: Georgia Bio’s member companies are directly affected by this concerning situation. Since Friday, CGHI: Georgia Bio has been monitoring the situation and is in contact with state and federal policymakers.
What We Know
This is an uncertain and evolving situation.
Early Sunday, Treasury Secretary Janet Yellen said there would be no federal bailout. However, later in the day Yellen, Federal Reserve Chair Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg issued a joint statement making 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.
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.
President Biden addressed the SVB collapse this morning.
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.”
“The ecosystem that allows America to develop groundbreaking new medicines is extremely important to our nation and to patients who depend on biotechnology companies,” said Rachel King, BIO’s CEO, in a written statement. “The recent actions by the FDIC, the Federal Reserve, and Treasury to allow SVB depositors to have access to all of their money is a very positive development to mitigate the potential harm to companies that are innovating across healthcare, agriculture, and the bioeconomy. We will continue to monitor the situation and will work closely with regulators to ensure that companies can meet payroll and continue to fund cutting-edge science and the development of treatments and therapies that patients are relying on.”
CGHI: Georgia Bio is continuing to monitor the situation and if a deal is brokered for the sale of the bank. Treasury and the FDIC seem to have stabilized the situation now. 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.
We’ll issue more bulletins as information becomes available.
Maria Thacker Goethe
Chief Executive Officer
Center for Global Health Innovation
Catch up quick: After the collapse of Silicon Valley Bank (SVB) Friday, the U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) stepped in to fully protect all depositors and ensure they have access to all of their money starting today, March 13.
Where to read more: Bloomberg has a comprehensive live blog of recent events, while STAT News has a deep dive into the impact on the biotech industry.
Why it matters to biotech: “Nearly half of all U.S. venture-backed technology and life science companies bank with SVB—the 16th largest bank in the country—with a total of $342 billion in client funds and $74 billion in total loans,” explains Fierce Biotech.