For many banks, including hashtag#SVB, securities purchased were of meagre yields, such as 10-year US treasury bills yielding less than 1%. However, rates have risen to 4.57% (most recently), creating sizeable differences. SVB, to maintain cash reserves, had to take an 8.6% haircut on selling USD 21bn+ securities due to the demand-supply imbalance, booking a loss of USD 1.8bn. So, when news circulated that things at SVB were looking shaky, events snowballed following a significant loss in SVB's portfolio.
#WhatIsHappening ⁉️ SVB has been officially shut down, accounts have been frozen, and FDIC has taken over the operations. Most founders can't withdraw funds, creating an environment of chaos and massive panic.
#OurAdvice 📨
1) Take a screenshot of your SVB account:
Keep some asset proofs ready if things go south, and also download your latest bank statements for future use.
2) Federal Deposit Insurance Corporation #FDIC Intervention:
The FDIC created the hashtag#DINB to transfer all insured deposits of SVB immediately. We expect all eligible accounts to have access to, at the very least, USD 250k (per federal limit) by Monday. Go to the following link for claims: https://lnkd.in/dUkgSYES
3) Open secondary US accounts:
Also, you are advised to withdraw your funds from SVB as soon as they become available and transfer them to established banks in the US (such as HSBC, Chase, or Goldman Sachs). Do the same urgently if you are banking with the First Republic (FRB), Mercury or the Brex of the world. SRGA Global can help you open an account with an established bank in the US. If you wish to remain with your current banking partner, which may be under the radar, please move funds to multiple accounts and ensure you use only up to the FDIC limit.
4) Bring the money back to India:
Suppose you have a USD 250k balance coming to you on Monday and no other advised banking partner in the US. In that case, fulfil all possible vendor payments and bring the remaining money to India as an advance for Software Development Services under the code P0802. These funds can earn interest and, if required, can be returned to the US. You might book a slight loss due to currency conversion rates, but this is very nominal compared to the risks on the table right now. SRGA Global can help you strategize and open new bank accounts in India.
5) Check your expenses & runway:
Ensure you have salary and vendor payments money in Indian banks and expand your runway.
#FinalThoughts 🫱🏻🫲🏽
SVB, for 40+ years, has been an important platform that played a pivotal role in serving the startup community and supporting the innovation economy in the US. If SVB were to be purchased and appropriately capitalized, VCs would strongly support and encourage their portfolio companies to resume their banking relations.