Dozens of customers lined up outside of a First Republic Bank in southern California on Saturday eager to withdraw their funds in the wake of the collapse of Silicon Valley Bank.
There had been fears following SVB’s demise for First Republic’s future when analysts pointed out the similarities between the estimated value of their assets versus the actual value.
According to the Daily Mail, The news of Silicon Valley Bank’s collapse sent shockwaves through the wine industry. It had been the main financial institution for wineries in California for almost three decades.
The California Department of Financial Protection and Innovation closed the bank on Friday after depositors, concerned about the lender’s financial health rushed to withdraw their deposits. The frenetic two-day run on the bank blindsided observers and stunned markets, wiping out more than $100 billion in market value for U.S. banks.
By Friday night, thousands of wineries in northern California found that they were completely locked out of their accounts with no clear timeline as to when they might be able to access their funds.
First Republic issued a statement on March 10 seeking to calm investors, pointing to its ‘continued safety and stability and strong capital and liquidity positions.’
The location that experienced a run on Saturday is located along San Vicente Boulevard on the outskirts of Los Angeles. The bank, founded in San Francisco in 1985, has 80 branches in 11 states nationwide – mainly on the West and East coasts.
The main difference between the two banks is that Silicon Valley Bank’s debt was in securities, while First Republic’s was in loans.
Similarly, both First Republic and Silicon Valley Bank rely heavily on customer deposits: in First Republic’s, wealthy individuals, and in Silicon Valley Bank’s, technology startups and venture-capital investors. With interest rates rising, First Republic’s clients have ample other places to park their cash, and could seek to withdraw.
California Gov. Gavin Newsom said Saturday that he’s talking with the White House to help ‘stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.’
U.S. customers with less than $250,000 in the bank can count on insurance provided by the Federal Deposit Insurance Corp. Regulators are trying to find a buyer for the bank in hopes customers with more than that can be made whole.