After The Silicon Valley Bank Failure, Companies Consider Moving Cash To Big Banks

A few weeks ago, Silicon Valley Bank's troubles led to Eddie Geller's company's checking account being closed. He had been with the bank for about five years.

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As a result of Silicon Valley Bank's closure, Geller says money transfers to Tinybeans (ticker: TNYYF) were canceled last Friday. Monday was the first day that SVB's services resumed after the government stepped in over the weekend.

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“A quick move to Chase was all we could do, says Geller. Tinybeans does not hold the bulk of its cash in the accounts in question, so it is weighing up how much of its banking needs it will bring to Chase. We are considering having multiple banking relationships. I don't expect us to put all our banking with Chase."

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There was a gyration on regional and community banks' stocks this week as investors were concerned that corporate clients looking for safety would move their cash to bigger banks first, before asking questions.

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According to Jack McCullough, who leads The CFO Leadership Council, a professional organization of about 1,900 chief financial officers, many CEOs contemplated remaining with smaller banks over the weekend. There were hundreds of people in attendance at the group's emergency online meetings on Friday and Monday.

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The idea of going to bigger banks was discussed, but not to the extent one might expect, says McCullough. Many CFOs preferred to keep their core banking local while depositing some future cash receipts in large banks.

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"Bigger banks will gain, rather than smaller banks losing," he said. "Midsize or community banks are often chosen because they want better services than what larger banks can offer."

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A week after Silicon Valley Bank was closed by regulators, Michael Bayer told me he had been considering moving his company's accounts to a global bank. Despite the federal intervention, the chief financial officer at Wasabi Technologies says the firm's cloud data storage firm will definitely switch to a global bank, despite the fact that his accounts are now secure.

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The trust has been lost, Bayer says. Wasabi might be satisfied with a regional bank if it were a small firm, but it now does business worldwide with global enterprise customers. “It’s sad at some level, but I have to move to a more stable, mature platform.” As a result, he says, he wants to switch to a global bank even more.

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She spent last weekend conversing with Silicon Valley Bank clients who were looking for a safe harbor at reliable regional or global banks as moderator of a Boston-area technology company financial executive network.

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Public companies attempted to distance themselves from the banks that made headlines over the weekend with announcements and filings.

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In an 8-K filing by the small Scottsdale, Ariz., company, it was said that it did not hold deposits or securities or maintain an account at Silicon Valley Bank, Signature Bank, First Republic Bank FRC –26.16, Ally Bank, or Silvergate Bank, or have any other banking relationship with those institutions.

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Josh Easterly, chief executive officer of Sixth Street Specialty Lending (TSLX), sent a letter to stakeholders explaining the bank imbroglio. In his view, Silicon Valley Bank has little entanglement with Sixth Street's portfolio companies.

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According to Easterly's letter, Silicon Valley Bank's risky approach to rising interest rates was in contrast to his lending firm's strategy. In contrast, Sixth Street issues debt with longer maturities than its loans, Easterly observed, while SVB funds long-term assets from short-term deposits.

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Its clients had uninsured cash and little credit demand, which was unusual for a bank, Easterly tells Trade Algo. "We don't finance many middle market businesses with uninsured cash deposits."

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Even companies making the move to multi-national banks are conscious of their environmental impacts. 

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“It is important to have a lot of medium and small banks as businesses and consumers,” says Tinybeans' CEO Geller.