Ripple CEO Reveals Impact of Silicon Valley Bank Closure on His Company
On Sunday, Ripple CEO Brad Garlinghouse revealed the impact of the recent closure of Silicon Valley Bank (SVB) on his firm, just two days after the bank was closed by Californian regulators and placed under the control of the U.S. Federal Deposit Insurance Corporation (FDIC).
With $175 billion in deposits, SVB was the 16th largest bank in the U.S. and the largest bank by deposits in Silicon Valley, which is the home of some of the biggest names in tech, including Ripple.
Interestingly, just a week before its closure, SVB had announced on Twitter that it had made it to Forbes’ annual list of America’s Best Banks for the fifth straight year – the tweet, however, is already deleted.
According to Ripple’s Chief Technology Officer (CTO), David Schwartz, he doesn’t understand how a run on a bank can cause it to become insolvent, stating that a run shouldn’t change either the assets or the obligations of a bank.
I still don't understand how a run on a bank can cause it to become insolvent. If the bank was solvent before, that means its assets exceed its obligations. A run doesn't change either the assets or the obligations, so how can the obligations now exceed the assets?
— David "JoelKatz" Schwartz (@JoelKatz) March 11, 2023
However, Schwartz explained that SVB was insolvent and did not mark-to-market their long-term treasury holdings. Ripple had some exposure to SVB since it was a banking partner and held some of its cash balance.
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Despite this, Garlinghouse stated that he expects no disruption to Ripple’s day-to-day business since they already held the majority of their USD with a broader network of bank partners.
Setting the record straight on SVB Qs:
Ripple had some exposure to SVB – it was a banking partner, and held some of our cash balance. Fortunately, we expect NO disruption to our day-to-day business, and already held a majority of our USD w/ a broader network of bank partners.
— Brad Garlinghouse (@bgarlinghouse) March 12, 2023
The Washington Post reported that federal authorities are considering safeguarding all uninsured deposits at SVB to prevent panic in the U.S. financial system.
Officials at the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation discussed the idea over the weekend.
The plan would be among the potential policy responses if the government is unable to find a buyer for the failed bank. The FDIC began an auction process for SVB on Saturday, with final bids expected by 2 p.m. Eastern time.
Alexander Stefanov
Reporter at CoinsPress
Alex is an experienced finance journalist and a cryptocurrency and blockchain enthusiast. With over five years of experience covering the industry, he deeply understands the complex and constantly evolving world of digital assets. His insightful and thought-provoking articles provide readers with a clear picture of the latest developments and trends in the market. His passionate approach allows him to break down complex ideas into accessible and insightful content. Follow up on his content to be up to date with the most important trends and topics - stay ahead of the curve with CoinsPress.
