Silicon Valley Bank Collapse – How are Deposits Protected in the Australian Banking System ?

uch is being written about the collapse of Silicon Valley Bank – the largest banking failure since the Global Financial Crisis In 2008.

A few interesting facts about Silicon Valley Bank – with thanks to finance industry commentator Eddie Donmez

  • Just days before the collapse, executives sold millions of dollars of stock: Gregory Becker, CEO sold 11%, Michael Zucker, General Counsel – 19%, Daniel Beck, CFO – 32%, Michelle Draper, CMO – 25%

    • `Their Chief Administrative Officer was the CFO of Lehman Brothers’ when it collapsed. They also went months without a Chief Risk Officer.

    • Silicon Valley Bank was hailed as one of ‘America’s Best Banks’ by Forbes magazine just about a month ago. They ranked 20th out of 100.

    • SVB’s CEO was on the San Francisco Federal Reserve’s Board, he’s not anymore for pretty obvious reasons.

    The debate now is around whether the bank should get bailed out by the Federal Reserve or not. This has massive implications for the depositors which are companies and major VCs in Silicon Valley.

The collapse of the bank does highlight the issue of depositor protection. In Australia, this is managed by APRA – under the Financial Claims Scheme (FCS)

Essentially, The FCS protects deposits up to a limit of $250,000 for account holders at each bank, building society and credit union incorporated in Australia. A bank, building society or credit union must be licensed by the Australian Prudential Regulation Authority (APRA).

Full details of the scheme can be found on APRA’s website.