Friday, March 17, 2023










Goldman Faces Lawmakers’ Demands for US Probe of Role With SVB

Gregory Korte
Fri, March 17, 2023 


(Bloomberg) -- A group of US lawmakers from California are asking for a federal investigation into what role Goldman Sachs Group Inc. might have played in the collapse of Silicon Valley Bank.

A letter Friday from 20 Democratic House members — led by Representative Adam Schiff — asks the Justice Department, the Securities and Exchange Commission and the Federal Deposit Insurance Corp. to include the New York-based investment bank in their preliminary investigations.

The request follows disclosures that Goldman Sachs served both as an adviser to the failed bank in late February and as the buyer of a $21 billion securities portfolio.

“Goldman Sachs stands to be paid more than $100 million for its role in a bond purchase that ultimately failed to save SVB from collapse,” the lawmakers said, citing an unconfirmed New York Times report. “As Goldman Sachs is poised to profit from SVB’s failure, we strongly urge you to analyze whether Goldman Sachs operated at ‘arm’s length’ in their role as adviser for SVB.”

A representative for Goldman Sachs didn’t immediately respond to a request for comment. Silicon Valley Bank, in a disclosure Tuesday, said the sale was “at negotiated prices.”

--With assistance from Sridhar Natarajan.


Collapse of Silicon Valley Bank Has Chinese Startups Worried
March 17, 2023 
John Xie
Silicon Valley Bank was the 16th-largest American bank before it failed this month.

WASHINGTON —

The collapse of Silicon Valley Bank has caused panic not just in the U.S. tech industry but also in China, where the bank has been a key player for years among Chinese startups.

In recent days, many startups in China have issued statements to reassure their investors that their deposits with SVB will not impact their operations.

Before the bank failed and was taken over by U.S. regulators this month, Silicon Valley Bank was the 16th-largest American bank. In foreign markets, SVB’s reputation for financing about half of all U.S. venture-backed technology and health care companies made it a popular choice for companies, including those based in China and backed by U.S. venture capitalists.

BeiGene, one of China's largest biotech companies that specializes in the development of cancer drugs, said that the collapse of SVB would have “no major impact” on its operations, and that its uninsured cash deposits in Silicon Valley Bank totaled only $175 million, or about 3.9% of its cash and other investments.

Zai Lab, a biopharmaceutical company headquartered in Shanghai, issued a statement saying that SVB’s collapse would have no impact on its operations, including the ability to pay wages and make payments to third parties.

Other startups, including Andon Health, Sirnaomics, Everest Medicines and Jacobio Pharma, have issued similar statements.

After SVB failed, the Biden administration stepped in and ensured that all customers would be able to get their deposits back, even those who had more than $250,000 in their accounts. That’s the maximum amount that the Federal Deposit Insurance Corporation typically covers when a bank fails, but more than 90% of Silicon Valley Bank accounts were above that amount.

With their SVB deposits frozen, many companies could have been at risk of failing themselves, so the Biden administration said it would step in to guarantee they would get their funds back.

FDIC reimbursements for Chinese customers?


On Chinese social media, there has been concern that the reimbursements may apply only to customers in America.

"Is it true that only depositors who are U.S. citizens can get their money back? What about us?" asked one post on Weibo, the Chinese version of Twitter.

William Hanlon, a partner at Seyfarth Shaw LLP, told VOA Mandarin in an email that the FDIC as receiver “will not categorize account holders by nationality” and “will treat all depositors equally based on their status as depositors.”

David M. Bizar, another partner at Seyfarth Shaw, said the FDIC is continuing to operate SVB as a full-service bridge bank while it searches for buyers of the bank's assets.

“It can be expected that the United States will continue to maintain these deposit accounts and keep them from losing their value so long as it maintains them in its receivership, and that the FDIC as receiver will not sell these deposit accounts to purchasers who would be permitted under the sale agreements to reduce their values after the transfers,” he told VOA.

So far, several Chinese companies have publicly said they were able to withdraw all their deposits at SVB.

SVB’s role in China


The now-failed SVB carved out a unique role in the Chinese banking scene. It served roughly 2,200 clients and advised government regulators who were eager to build the country’s tech sector. The Santa Clara, California-based bank supported startup companies that not all banks, especially the big commercial ones in China, would accept because of higher risks.

In 2010, then-CEO Ken Wilcox brought the entire board of directors to China to showcase the importance he attached to the China market, according to Chinese media reports. In a 2019 interview, when he was SVB’s chief credit officer, he said SVB was “a model bank for China.”

SVB approached China in two different ways. One involved wholly owned operations in major tech centers, including Beijing, Shenzhen and Shanghai, where it advised startups on how to manage overseas funding. The other involved a 50-50 joint-venture with Shanghai Pudong Development Bank, also known as SPD Silicon Valley bank, that operates under a similar model as SVB.

Following the collapse of SVB, the Chinese policymakers signaled stricter oversight to improve financial market security.

The South China Morning Post quoted Liu Xiaochun, deputy director of the Shanghai Finance Institute, as saying it was inappropriate to set up a similar specialist bank in China.

He argued that to avoid potential losses in supporting tech and health startups, large commercial banks should establish branches to finance innovation, while managing risk exposure at headquarters.


SVB failure offers lesson for China - state media

 -The collapse of Silicon Valley Bank (SVB) will not impact China's financial system but offers an important lesson for the country's banking industry, the official Securities Times said in an editorial on Wednesday.

An SVB-style bank failure is unlikely to happen in China but the incident would have "important implications for the development of China's small- and medium-sized lenders, and the stability of China's financial system," the editorial said.

SVB's shutdown on Friday has roiled global markets, forced U.S. President Joe Biden to rush out assurances that the financial system is safe and prompted emergency U.S. measures giving banks access to more funding.

In China, shares of smaller lenders including Bank of Lanzhou 001227.SZ, Xi An Bank 600928.SS and Xiamen Bank 601187.SS have far underperformed big banks over the past week, amid concerns over their ability to manage risks.

China's smaller banks, more vulnerable to interest rate risks, could suffer from shrinking interest spreads and investment losses during a rate hike cycle, GF Securities said in a report this week.

The Securities Times said that while the SVB incident reflects loosened regulation of such banks in the U.S., a slew of financial regulatory reforms in China over the past years have cleaned up the industry, curbed shadow banking and reduced financial risks.

In addition, China has been closing regulatory loopholes, the editorial said. In the latest move, China said last week it would set up a new national financial regulatory body consolidating oversight of the industry.

"Although the SVB incident won't have material impact on China's finiancial markets, China's financial industry still needs to earnestly learn from this lesson, and always prioritise risk prevention and control," the newspaper said.

SVB's SIVB.O China joint venture has also sought to ease fears among clients and investors, saying on Saturday it has a sound corporate structure and an independently operated balance sheet.


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