Middle East awaits impact of Silicon Valley Bank crash

Reuters/Eduardo Munoz

• Silicon Valley Bank is largest to fail since 2008
• Customers have been guaranteed access to their deposits
• Mena startups raised $760m in February

The Middle East faces an anxious wait to fully understand the impact of the demise of Silicon Valley Bank (SVB).

SVB Financial Group on Friday became the largest bank to fail since the 2008 financial crisis, roiling markets and leaving billions of dollars belonging to companies and individuals stranded.

Most major Gulf stock markets fell on Monday despite a slight gain in oil prices, as investors showed caution.

• Kuwait central bank expects little SVB impact on local lenders
• World markets set for aftershocks as SVB collapse ripples out

Californian banking regulators closed down SVB as part of efforts to protect depositors following a dive in the value of its investment holdings and a rush of withdrawal requests.

At the end of 2022 SVB – the 16th largest bank in the US – had $175.4 billion in deposits.

Sources told Reuters that the bank was exploring a sale, and trading in its shares was halted after they plummeted 60 percent late last Thursday.

Mohammad Alblooshi, head of Dubai International Financial Centre’s Fintech Hive, which consists of over 650 fintech startups, said it had been a “nervous” time over the weekend.

“When a major bank collapses it reminds us of 2008,” he said.

This has since been tempered by an announcement from US authorities guaranteeing SVB customers would have access to their deposits.

“No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer,” said a joint statement from the US treasury, Federal Reserve and Federal Deposit Insurance Corp. 

Authorities added they would do the same for New York-based Signature Bank, which was closed by regulators on Sunday and became the third largest bank to collapse in US history.

Alblooshi said that because of this move by US authorities, there “shouldn’t be a major impact” for the Gulf.

Kuwait Finance House said on Monday that it has $1.2 million exposure to SVB, although the bank stressed it has “no material financial impact” from the fallout.

Jerusalem-based investor crowdfunding platform OurCrowd revealed that it transferred “almost all” of its money out of the bank before it failed.

Its CEO Jon Medved said: “While it seems that the worst of the crisis may have passed for now (although this is not certain), the profound longer term impact these events will have on the global innovation community and larger economy will become more apparent in the coming weeks and months.”

Startups in the Mena region raised $760 million across 48 deals in February, up from 22 contracts worth $104 million the month before, according to data compiled by early-stage investment fund Wamda.

Funding value increased by 638 percent month-on-month and 103 percent year-on-year.

“SVB or no SVB, startups in Mena will still need to work hard to raise,” said Lucy Chow, general partner at WBAF Angel Investment Fund. “That is due to the relatively small size of our ecosystem.

“The ‘bad’ is that we don’t really have an SVB equivalent that is the cornerstone for VCs. Perhaps, on the flip side, this counts as a ‘good’ too.”

Abu Dhabi state backed investment vehicle ADQ was reported by Sky News to have been interested in buying the UK arm of SVB, but that has since been bought for one pound by HSBC.