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Feds move to protect Roku’s $487 million in SVB

Roku said 26 percent of its $1.4 billion was held in now-failed Silicon Valley Bank.

Roku said 26 percent of its $1.4 billion was held in now-failed Silicon Valley Bank.

The United States federal government says it will fully protect financial deposits made with Silicon Valley Bank (SVB), a move that is intended to thwart a catastrophic collapse of the national economy following the failure of a bank revered by large and small technology companies alike.

The announcement made Sunday will ensure several large tech firms will have their deposits fully insured, well above the $250,000 safeguard promised by the Federal Deposit Insurance Company (FDIC) on typical checking and savings accounts.

The move is good news for Roku, which announced late last week that it had around $487 million in capital tied up at SVB. The cash deposited with SVB accounted for around 26 percent of its $1.4 billion in liquid capital and equivalents. The company told investors it wasn’t sure when, or if, it would see that money again.

SVB was established in the 1980s to provide financial assistance to technology startups, primarily those in the San Francisco Bay Area who struggled to get financial backing from more-traditional banks. It soon became the 16th-largest bank in the United States.

Last week, SVB was subject to a credit rating downgrade after the bank sold $21 billion in securities to bring in new liquid capital. The sell off ultimately resulted in an after-tax loss of $1.8 billion; SVB announced plans to sell another $2.2 billion in shares.

The announcements sparked a fever of social media posts from tech and finance mogul Peter Theil and others, triggering a mass withdrawal of funds by customers within 48 hours. The bank run ultimately led to SVB’s collapse; state officials in California ultimately seized the bank, and the federal government said it was working on a plan to insure deposit accounts.

Dozens of prominent tech firms were impacted by the sudden collapse of SVB, including Roku, Roblox, Eety, Circle, Stitch Fix, LendingClub and Life360. While most big-name firms said they would still be able to meet expenses, about a third of startups backed by Y Combinator warned they might not be able to pay employees and meet other financial obligations.

On Monday, details of the federal government’s plan to insure SVB’s deposit accounts came into focus: The U.S. Federal Reserve will offer one-year loans to SVB and other banks affected by last week’s collapse, though the banks will have to put up serious collateral like agency debt or mortgage-backed securities. The loans will be offered on top of the FDIC’s $250,000 insurance on deposit accounts.

“This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” a spokesperson for the Federal Reserve said in a statement. “The Federal Reserve is prepared to address any liquidity pressures that may arise.”

The Federal Reserve will also organize a new Bank Term Funding Program that will help safeguard other institutions affected by the sudden collapse of SVB and at least one other bank, CNBC reported.

“Today, we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” government officials said in a joint statement.

Financial analysts are cautiously optimistic that the multi-prong approach taken by the federal government will work.

“This should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age,” Paul Ashworth, a chief economist with Capital Economics, told CNBC in an interview. “But, contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work.”

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).