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March 13, 2023

CT Innovations has "approximately 20" companies with ties to failed banks

HBJ PHOTO | STEVE LASCHEVER Connecticut Innovations CEO Matt McCooe.

Quasi-public state agency Connecticut Innovations says it has invested $30 million in "approximately 20" companies that had ties to the recently failed Silicon Valley Bank and Signature Bank.

In planning sessions over the weekend and Monday, staff at the state’s venture capital investment arm developed plans to shield those investments. 

Connecticut Innovations and other investors agreed to offer short-term bridge loans to “one or two” companies that could face operating shortfalls as a consequence, CEO Matt McCooe said.

“Were one of our companies to be short of payroll, we and other investors agreed to step in and wire the money,” McCooe said.

It appears, however, that investors might not have to disburse cash to keep companies afloat, given the assurances by federal officials that all depositors will be made whole, McCooe said.

“The long and short of it is all of our companies will be fine,” McCooe said, praising quick action by Treasury Secretary Janet Yellen and other federal officials. “Our companies are secure, and all their employees are fine.”

McCooe said it would have been a vastly different scenario if federal officials hadn’t moved fast to sooth worried investors and depositors.

“Had that not happened, today and this week could have been absolute chaos for the U.S.,” McCooe said. “(Yellen) and others did the right thing, the courageous thing and, again, the federal government stepped in to stabilize the economy.”

Federal officials continued their efforts Monday to contain the self-fulfilling cycle of uncertainty and instability in the banking system following the failure of Silicon Valley Bank on Friday and New York-based Signature Bank on Sunday. According to various news reports, other banks, including San Francisco-based First Republic Bank, are teetering as depositors and investors try to pull funds.

Silicon Valley Bank made a specialty of investing in tech startups, offering the lowest available rates, McCooe said. He believes its error was in concentrating too much in one, vastly interconnected industry, in which fears can quickly echo and spread.

Connecticut Department of Banking spokesman Matthew Smith, on Monday, reassured residents their money is safe in the state's banks and credit unions, which, "on average," have a very different customer base than Silicon Valley Bank. Most depositors' savings fall within the $250,000 limit assured by the FDIC, he noted.

"Connecticut Banks are subject to regular and thorough examinations by the department," Smith said. "Part of this process is to review every institution's assets, liabilities and risk exposure," Smith said. "In addition, each institution files with the federal regulators a quarterly financial report which outlines their financial condition. We ensure that each institution has mitigated risks and are sufficiently capitalized to meet the needs of each depositor." 

Ion Bank President and CEO David J. Rotatori said Connecticut banks are well positioned for any broader industry turbulence.

“We are in solid shape,” said Rotatori, whose Naugatuck-based bank had $2 billion in assets as of December. “We keep a lot of liquidity as a mutual bank. I would say Connecticut banks are all strong, with strong capital levels and liquidity levels.”

Rotatori said he hopes the actions by federal officials avert unnecessary disruption.

“I think there will be a little bit of panic that could potentially happen, but, in general, the banking system is not in jeopardy,” Rotatori said. 

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