Following the collapse of two notable banks in America – and potentially a third one this week (First Republic Bank) – here at IG Wines we are focusing on Silicon Valley Bank (SVB) and how the fallout of these events may influence the wine sector. Despite the apparent low correlation between the wine industry and this tech and healthcare focused bank, SVB was in fact a leading lender for many Californian wineries.
At the end of 2022, SVB had $1 billion in wine loans, which made up 2% of its total loan business. The bank’s collapse last Friday left thousands of wineries in chaos as the bank they were depending on was put into receivership. For many businesses, this caused anxiety about whether their staff would be paid and transactions processed. Considering the bank closure, the Federal Deposit Insurance Corporation (FDIC) is on the lookout for new buyers for the now defunct banking divisions. Therefore, these loans may have to be restructured with less favourable terms with a fresh lender.
However, on Monday 13th March, a multi-billion dollar federal bail-out package for depositors at SVB was announced. The monetary aid comes as a huge relief to many businesses and producers who may have otherwise gone bankrupt and will prevent California’s wine industry from going into a financial meltdown.
Wineries can now take care of their payroll, accept card payments and settle bills, as well as resume any delayed renovations, purchases, or expansions. Nonetheless, the SVB saga is far from over, and we’ll be watching closely as Californian wine makers adapt to the fallout and have to cope with the loss of a specialised lender in the long run.