The turmoil at US-based First Republic Bank (FRB) has once again tripped alarms in the highly interconnected global banking system. And while the lender’s woes aren’t expected to directly affect Latin America, they‘re not helping to bring stability to the ecosystem either.
FRB, which caters to high-income sectors and startups, announced on Monday its deposits fell by more than US$ 100,000 million in the first quarter, a drop of 40%. The disclosure sent the company’s shares tumbling 64% through Wednesday. The shares recouped some of their losses on Thursday though the bank has yet to announce a clear plan for recovery.
The impact of a potential FRB bankruptcy would not be comparable to the fallout from the collapse of Silicon Valley Bank (SVB) two months ago, specialists agree, because few Latin American tech companies hold deposits there. However, it adds to the uncertainty for Latin fintechs and represents another obstacle to their capital-raising efforts.
“I don’t think it’s going to produce an impact even remotely similar to SVB,” Jorge González, managing partner of Mexican investment firm G2 Momentum Capital, tells iupana. “But it’s still a crisis of confidence in the sector, for the startup ecosystem and the capital drought that caused all of this,” he adds.
According to conversations in chats with startup founders participating in the Y Combinator accelerator, companies don’t seem worried about repercussions from FRB’s troubles and see the status quo prevailing.
“FRB didn’t have the same market penetration as SVB,” says Gustavo Gawryszewski, founder of Moner, a Brazilian collection technology company. “The danger is more for the stability of the American financial system, rather than directly for LatAm startups.”