Ripple CEO Confirms SVB Exposure as FDIC Affirms It Would Cover All Deposits.
Over the weekend, the blockchain payments based in Silicon Valley faced questions over whether it had exposure to the collapsed bank.
Without going into details, Ripple Chief Executive Officer Brad Garlinghouse has confirmed that the firm has money tied up in the failed Silicon Valley Bank.
The Ripple chief disclosed this in a three-part Twitter thread on Sunday.
“Setting the record straight on SVB Qs: Ripple had some exposure to SVB.”
However, he assured the public and customers that this exposure was not significant enough to disrupt company operations. According to Garlinghouse, the firm had a diversified network of banking partners where it held cash reserves.
“Ripple remains in a strong financial position,” Garlinghouse surmised, despite the uncertainty surrounding SVB customer deposits at the time.
Notably, the Ripple chief pointed out that the SVB collapse highlighted the weaknesses of the traditional financial system. Namely, rumors can spark bank runs that lead to collapse, banks can not process wire transfers around the clock, and money movement remains difficult.
Over the weekend, the blockchain payments company based in Silicon Valley faced questions over whether it had exposure to the collapsed bank. As reported, Ripple Chief Technology Officer David Schwartz had disclosed that the firm would issue an official statement.
FDIC To Cover All SVB Deposits
Meanwhile, on the heels of Ripple’s disclosure, the Federal Deposit Insurance Corporation (FDIC) has disclosed that it would cover all SVB deposits regardless of whether or not they are insured.
According to a recent Bloomberg report, depositors would have access to all their money from Monday, March 13. The FDIC can do this through a “systemic-risk exception” rule that allows the Fed to make direct loans.
Initially, the FDIC planned to make insured depositors whole while issuing advanced dividends to uninsured depositors. But as highlighted in a previous report, over 93% of SVB customers were uninsured. Due to this and the difficulty in getting a buyer within the weekend due to the short timing for due diligence, regulators opted to backstop deposits to prevent a potential spillover effect and the collapse of several American tech startups that banked with SVB.
As highlighted in previous reports, SVB experienced a bank run last week that forced regulators to step in on Friday. The bank run started after it disclosed plans to sell significant shares to raise capital after taking losses on previously held securities due to Fed rate hikes. With the bulk of customer deposits placed in long-term securities, it lacked the liquidity to meet the onslaught of withdrawal requests.
While the FDIC processes withdrawals, it will likely start another auction within the week to continue searching for buyers. As reported, Elon Musk had indicated an interest in acquiring the collapsed bank.