Bloomberg Línea — Eight months after the collapse of Silicon Valley Bank (SVB), which sparked a crisis in the mid-sized banking sector in the United States, the financial institution’s current managers are looking to win back clients from Latin America and are seeking an executive to head up business with companies in the region, said Andy Tsao, SVB’s managing director and leader for international markets.
“We are working hard to let our clients, funders, investors and partners know that SVB is back-’Yes, SVB’-operating the same way we did many years ago,” Tsao told Bloomberg Línea in e-mailed responses.
In recent days, SVB has opened a vacancy for a vice president of business development focused on startups for Latin America, based in Miami, the San Francisco area or New York.
Tsao said the decision to expand the team was due to the large number of clients in the region, despite the fact that “market conditions in Latin America have been difficult this year”.
Before the crisis, SVB was one of the favorite banks - if not the leader - of Silicon Valley venture capitalists and the startups they funded, including Latin American companies.
But concerns about the institution’s financial health triggered a run on the bank, which caused the bank to fail and which was intervened by the FDIC, Brazil’s equivalent of the Credit Guarantee Fund. At the end of March, SVB was acquired by and became a division of regional bank First Citizens.
After the most acute phase of its crisis, the bank’s new management is now seeking to recover the resources of former clients, especially in Latin America.
Tsao acknowledged that the events of March have affected SVB’s position in the region, leading to a transfer of funds. The fintech Brex, founded in Silicon Valley by Brazilians Henrique Dubugras and Pedro Franceschi, was one of the biggest beneficiaries.
However, according to Tsao, no accounts were closed and now those customers are coming back.
“Now that our customers understand that we have been acquired and operate as a division of First Citizens Bank, with the same team and focus, and that our financial situation is very solid, we are seeing funds coming back into the bank,” Tsao said.
Fierce competition
However, in addition to regaining the trust of its customers, SVB will have to face competition from institutions that moved to capture funds during the banking crisis and after.
In the race to receive the money from Brazilian startups - which withdrew more than $200 million from SVB the day before the bank’s closure - companies such as Trace Finance and Latitude launched banking products to rescue the balances of startups that still had money tied up in the bank under FDIC intervention.
Money from Brazilian startups at SVB was also transferred to larger banks such as JPMorgan and Morgan Stanley, and smaller institutions such as Mercury, in addition to the aforementioned Brex. After the collapse, the fintech received $1 billion in deposits, “with a colossal volume coming in within 48 hours”, Brex’s Franceschi said in an interview with Bloomberg Línea last week.
To serve new clients, Trace Finance launched in March an American account for foreign companies with a bank in Tennessee and announced at the end of September a global account in partnership with an American bank, whose name cannot be disclosed.
Bernardo Brites, CEO of the company, told Bloomberg Línea at the time that initially the fintech was also exploring the option of the Evolve bank, commonly used by fintechs. However, after evaluating the alternatives, he decided to choose the American bank in question, believing it offers “another level of security and peace of mind for companies to leave their money there,” according to him.
With this account, he stated it would be possible to bank companies headquartered in the Cayman Islands, the British Virgin Islands, the United States, and the Bahamas. “In practice, we will be able to bank the entire startup ecosystem of Latin America,” he told Bloomberg Línea at the end of September.
SVB’s track record in Latin America
Tsao said the bank’s track record in Latin America is not recent, which translates to some advantage. “It actually started more than a decade ago, on our first trip to Brazil in 2012. We discovered a vibrant ecosystem with inspiring founders [...] Since then, we have been involved with the region, having the privilege of working with some of the leading founders and investors”.
The executive also stated that, “following the events of March, there is still a misconception that SVB no longer exists or that we have changed our approach to startups”, and which, he added, is not true.
“SVB is back, operating in the same way for Latin American startups and investors as before March. As we engage with our clients, we receive a lot of encouragement and even joy when they realize that SVB is back.”
Clients say that no one has catered to the Latin American innovation economy like Silicon Valley Bank has, he added.
“SVB has a specialized approach and an understanding of the needs of startups and investors that is not easy to replicate. As we have said before, we are seeing clients bring funds back to SVB. We remain committed to the region.”
Article updated at 5:46 p.m. BRT on Thursday (2) in the section referring to the partner bank of Trace Finance in the USA, whose name cannot be disclosed due to contractual reasons