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Bloomberg Quotes Jerrold Bregman on Silicon Valley Bank Collapse and Loan Covenants

Bloomberg extensively quoted Jerrold Bregman in its March 15, 2023 article about Silicon Valley Bank’s (SVB) failure and the effect on loan covenants, now that business customers who are borrowers are being asked to return after the bank run that led to the bank’s failure and FDIC receivership. (Article entitled: “SVB Clients at Risk of Default May Have No Choice But to Return.”) The article examines the interplay between banking deposits and borrowing, and examines how business borrowers should respond in light of loan covenants that require borrowers to keep their deposits at the bank.

When asked about businesses that had withdrawn their deposits during the “run” and collapse of the bank, Bregman noted, “I don’t think that it’s a bad move to have taken money out.” He went on to explain: “The question is whether they should put money back in, and I think that’s going to have to be decided in each case based on the borrower’s relationship with whoever the lender party turns out to be.”

When asked whether borrowers should comply with loan covenants and return their deposits to the bank which is under FDIC receivership, Jerry suggested borrowers should be “trying to obtain some assurance of the continued lending relationship, and if they can’t get reasonable assurances and get comfortable around that, it may be an appropriate decision to risk violating the covenant.”

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