In addition to the many local tech companies large and small that are likely to be impacted by the collapse of Silicon Valley Bank (SVB), we're learning that they were a major lender and banking partner for the wine industry, accounting for about 2% of the bank's total business.
Money managers at companies across the region are scrambling to figure out what they will have in terms of cash and credit next week in order to make mid-month payrolls, following Friday morning's swift collapse of Silicon Valley Bank.
"No one has the answer," says Ryan Gilbert, founder of venture firm Launchpad Capital, speaking to CNBC. At issue will be all the companies that have deposits at SVB totaling more than $250,000 — or payrolls on March 15 that exceed that amount. The FDIC has taken SVB into receivership, and has set up a new bank called the Deposit Insurance National Bank of Santa Clara, which will handle all insured deposits, up to $250,000, next week. Amounts over that will need to be recovered as the feds liquidate the bank's assets — which could take time, and not all that money may be recovered.
As the Chronicle reports, the collapse of SVB could have massive and widespread repercussions for the Bay Area wine industry, where the bank has reportedly extended $4 billion in loans over the last 30 years.
Calling the bank the "go-to financial institution for the California wine industry," the Chronicle suggests that payrolls for farm workers could be held up next week, and so could any pending deals to buy vineyards or wineries. Also, any winery that takes credit card payments in their tasting rooms using SVB could have problems as well.
Then you have what the future may hold for wineries whose growth has depended on the knowledge base that was built up at the wine division of SVB.
As one winemaker, Jasmine Hirsch, at Hirsch Vineyards in Sonoma County, tells the Chronicle, "So much of our business’ assets are tied up in inventory. And who understands wine inventory? How do you value it? How can you borrow against that if you don’t know how to value it?"
It's an example of how intertwined the tech industry has become in so many aspects of the Bay Area economy.
Pundits and analysts are already suggesting that Silicon Valley Bank was a special case, and not indicative of the larger banking industry — having spent decades taking risky bets on startups which, in the economic environment of the last year with interest rates rising, left them sitting on a house of cards.
"Everyone on Wall Street knew that the Fed’s rate-hiking campaign would eventually break something, and right now that is taking down small banks," says Ed Moya, senior market analyst at Oanda, speaking to CNN.
Overall, though, says Moody’s chief economist Mark Zandi to CNN, no one should see this as the first domino falling like in 2008. "The system is as well-capitalized and liquid as it has ever been. The banks that are now in trouble are much too small to be a meaningful threat to the broader system."
He did say "banks" plural, though, and Treasury Secretary Janet Yellen is said to be monitoring a "few" other banks, per Bloomberg.
Photo: Jim Harris