LEXINGTON, Ky. (FOX 56) – Two banks just collapsed in Silicon Valley and it is historic.
The collapse of Silicon Valley Bank and Signature Bank is being compared to the 2008 financial crisis. So, what does this mean for Kentuckians and is their money safe in the banks?
Ballard Cassady, president of the Kentucky Bankers Association said, “Well of course, the banking system in and of itself is a very strong and resilient system. This Silicon Valley bank was a one-off if you will.”
Silicon Valley Bank invested in startups and Signature bank betted on crypto. And as the tech market started turning down, the interest rates started going up. Those invested sectors will feel the direct effects, but Cassady assured the Commonwealth’s banks were safe.
LATEST KENTUCKY NEWS:
“It’s so farfetched from what we do in Kentucky,” Ballard said. “We’re very conservative, very diversified. Kentucky is always ranking in the top 10% of the industry, historically, as performance rations go. In Kentucky, you can get even stronger balance sheets.”
However, Kentucky startups and small businesses may feel indirect impacts. One startup, celebrating its 10-year anniversary Monday weighs in.
Lexington-based business Xooker, a mobile marketing company, that helps local businesses attract new customers, said it will feel indirect impacts from Silicon Valley.
Conrad Carney, CEO of Xooker, said “Companies like us that are looking to tap into that venture capital, there’s going to be a slowing at a pace of investments over the next six to 12 months. So that’s where small, local startups and early-stage companies’ businesses that are looking to go after venture capital funds.”
Carney said fundraising season for ‘Series A Funding’ is approaching, and there will be different demands from Venture Capitalists as a result of the bank collapses. Carney said it will raise the bar on his business performance in order to attract a VC.
“It means we’re going to work on the markets we’re currently in, which is 23 markets, and grow those markets, continue to add customers on which generates the revenue base for us and continue to hold out until we’re able to secure that funding and have VCs invest in the company,” Carney said. “Now the real problem will be with a lot of these startups that have money in the bank, having to be able to make payroll and pay those expenses and have access to that money in the bank.
Ballard said while it was fun to watch Silicon Valley grow from $70 billion to $200 billion in less than 15 months, it was also sad to see the bank’s collapse as a result of improper risk management.
However, President Joe Biden announced Monday the Federal Deposit Insurance Corporation (FDIC) will insure deposits up to $250k, for up to two accounts.