Although the collapse of Silicon Valley Bank (SVB) is raising concerns among biotech companies and venture capital firms, the United States government has taken steps to protect depositors.
The U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) intervened following the collapse of SVB on Friday, March 10, in order to completely protect all depositors and guarantee they have access to their funds as of Monday, March 13.
“The U.S. banking system remains resilient and on a solid foundation, in large part due to reforms that were made after the financial crisis that ensured better safeguards for the banking industry. Those reforms combined with today’s actions demonstrate our commitment to take the necessary steps to ensure that depositors’ savings remain safe,” the joint statement reads.
According to Fierce Biotech, “nearly half of all U.S. venture-backed technology and life science companies bank with SVB—the sixteenth largest bank in the country—with a total of $342 billion in client funds and $74 billion in total loans.”
Federal steps to protect biotech funds
To avoid a similar risk, federal regulators shut down the cryptocurrency-focused Signature Bank and announced that they would “make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors.”
“Americans can rest assured that our banking system is safe. Your deposits are safe. Let me also assure you, we will not stop at this. We’ll do whatever is needed,” U.S. President Joe Biden said, per ABC News.
According to BioPharma Dive, several biotech companies, including those not working with SVB, released rapid remarks on Friday and over the weekend, adding that some planned conference calls with investors were subsequently canceled after Sunday’s collapse announcement.
“I literally had to send an email [on Thursday] to our major investors saying don’t worry about us,” startup Infinimmune’s founder and CEO Wyatt McDonnell said.
Michael Gilman, the CEO of startup Arrakis Therapeutics, says he is confident that the institutions holding his company’s funds will handle the situation properly, however, “we’ve all been taught an acute lesson about the need to diversify,” he noted.
In a written statement, the Biotechnology Innovation Organization’s (BIO) interim CEO Rachel King said, “The ecosystem that allows America to develop groundbreaking new medicines is extremely important to our nation and to patients who depend on biotechnology companies. 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.”
King assured, “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.”
Read this article to see a list of biotech companies affected by the SVB collapse.