With the shocking collapse of US-based Silicon Valley Bank (SVB) on 10 March, concerns are being raised by financial industry executives that this may have a domino effect on other US regional banks if regulators fail to find a buyer over the weekend to protect uninsured deposits, reported Reuters on 12 March.
As per details, the start-up lender is the largest bank to fail since the 2008 financial crisis. This failure has not only roiled markets, but have left billions of dollars belonging to companies and investors stranded.
To get the lender out of financial crisis, the Federal Deposit Insurance Corporation (FDIC) has been appointed receiver and was trying to find another bank over the weekend which was willing to merge with Silicon Valley Bank.
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Nazara Tech’s ₹64 cash holding in SVB:
In the meantime, digital gaming and sports platform Nazara Technologies on March 12 said its step-down subsidiaries – Kiddopia Inc and Mediawrkz Inc – hold cash balances in the SVB. Details say, the balances held at SVB by the subsidiaries cumulatively account for around ₹64 crore ($7.75 million).
Both owned by Nazara, Kiddopia Inc (51.5% stake) is a subsidiary of Paper Boat Apps Private Limited, while Mediawrkz Inc (33% stake) is a subsidiary of Datawrkz Business Solutions Private Limited.
“FDIC has stated that it would issue an advance dividend to depositors within the next week with future payments coming as asset sales occurred. Regardless of the ultimate outcome and its timing, both subsidiaries continue to be well capitalised and are generating positive cash flows along with profitability. Therefore, we expect no impact on their day-to-day operations, business performance and growth plans due to the SVB event,” Nazara said in the filing.
Apart from this, the company added that the group continues to maintain healthy reserves of cash and cash equivalents in excess of ₹600 crore excluding the SVB impacted funds.
List of probable buyers:
SVB’s financial health declined this week following the bank announced plans to raise up to $1.75 billion aiming to strengthen its capital position.
Among the list of potential buyers, California based lender Santa Clara – with $209 billion in assets – may pull off a deal over a weekend relatively short, added the Reuters report.
Meanwhile, both US Federal Reserve and the FDIC were weighing on the creation of a fund that would allow regulators to backstop more deposits at banks that run into trouble, Bloomberg reported.
Also, to address the situation, the White House on Saturday that President Joe Biden had spoken with California Governor Gavin Newsom about the bank.
On the probable list of buyers, the banks include Signature Bank, First Republic Bank, PacWest Bank, Charles Schwab and Western Alliance Bank. However, nothing has been confirmed as of yet.
With agency inputs.