The recent bankruptcy of Silicon Valley Bank in California, followed by the closure of Signature Bank in New York, is expected to have a ripple effect on the venture and startup industries in many countries, including South Korea.

With the financial market closely tied to venture investment, the Korean government is closely monitoring the situation. It is inevitable that the venture capital industry will see a downturn in sentiment despite the U.S. government’s promise to fully cover failed customer deposits.

The Ministry of SMEs and Startups is also monitoring the situation regarding the bankruptcy of SVB and the impact it may have on the domestic venture industry, a ministry spokesperson said.

“Right now, it is more of a finance issue than a venture capital issue, but we are trying to see if there are any impact because finance is interconnected with venture capital,” the spokesman said. “We are looking at it from a supervisory, risk management perspective.”

Although Korean startups have not directly used SVB to deposit funds or receive investments, the bank’s collapse comes at a time when the local venture investment market has already been hit hard by high-interest rates and inflation.

Last year, venture investment in Korea stood at 6.76 trillion won ($5.2 billion), down by 11.9 percent compared to the previous year, with a particularly sharp decline of 38.6 percent and 43.9 percent in the third and fourth quarters, respectively.

The collapse of a bank specializing in venture investment could lead to further psychological distress in the market, observers said, although the tension eased after the U.S. government announced that it would guarantee all customer deposits with SVB, regardless of the insurance limit of $250,000.

By Pulse

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]