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Chancellor in crisis talks on Silicon Valley Bank meltdown


Chancellor in crisis talks on Silicon Valley Bank meltdown

Chancellor in crisis talks on tech bank meltdown: Ministers and officials scramble to find a buyer as Silicon Valley Bank’s UK arm is shut down

  • Collapse of SVB’s US parent largest bank failure since the 2008 financial crisis
  • British arm set for insolvency unless there are significant new developments 
  • Officials at BoE scrambling to find buyer in order to minimise disruption

Britain’s tech industry is locked in crisis talks with the Government after the Bank of England said it intends to put the UK arm of American lender Silicon Valley Bank (SVB) into insolvency.

The sudden collapse of SVB’s US parent sent shockwaves through global markets as it became the largest bank failure since the 2008 financial crisis.

SVB’s British arm will be put into insolvency by the Bank of England from this evening unless there are significant new developments. Officials at the Bank are scrambling to find a buyer in order to minimise disruption to business customers and the risks to the financial system.

Chancellor Jeremy Hunt spoke to Bank governor Andrew Bailey yesterday and agreed to work to find a solution.

Andrew Griffith MP, Economic Secretary to the Treasury, held a round table with firms yesterday afternoon.

Signing off: The sudden collapse of SVB’s US parent sent shockwaves through global markets

Founded in 1982, SVB was the biggest bank in Silicon Valley and specialised in lending to start-up tech firms. Plans for SVB’s UK insolvency would trigger a compensation scheme that pays out up to £85,000 of customers’ deposits or £170,000 for joint accounts. Crucially, it has no personal savers or borrowers.

In its statement, the Bank said SVB had a ‘limited presence’ in the UK and ‘no critical functions supporting the financial system.’ But the speed of its downfall, confirmed by its UK chief executive Erin Platts in a message on its website, sparked alarm in the UK’s close-knit tech community.

Some 210 representatives of firms employing 10,000 people signed an open letter to the Treasury last night claiming that SVB’s implosion posed an ‘existential threat’ to the UK tech sector. It said ‘the majority of the most exciting and dynamic tech businesses bank with SVB’ and added that some were running numbers to see if they were already technically insolvent.

Joe Healey, chief executive of fledgling biotech firm NanoSyrinx, said the firm has £3.5 million in the bank that it can’t access. He added: ‘At the moment we don’t even have enough money in the company to wind up in an orderly fashion if that’s what we needed to do.

‘We had access to the SVB website on Friday but it’s now fully locked down.’

Russ Shaw, founder of industry group Tech London Advocates, said: ‘The Treasury must be looking at this and saying we don’t want to lose a generation of start-ups.’

Around 3 million Britons work in the tech sector, which raised £24 billion in funding last year.

It is understood Treasury officials have been contacting firms affected. They are believed to be asking them to provide details on loans and deposits at the bank and whether they have access to other UK lenders.

A Treasury spokesman said: ‘We are working with the Bank of England to ensure that Silicon Valley Bank UK’s failure is managed smoothly, and that any disruption is minimised.’ He added that the situation at SVB did not have implications for other UK banks and that the system is ‘strong and resilient’.

Talks: Erin Platts, SVB’s UK chief executive

Talks: Erin Platts, SVB’s UK chief executive 

There are hopes this weekend that a larger bank will take over the UK subsidiary, which has backed well-known tech firms including PensionBee and Trustpilot, in a rescue deal. Potential buyers include Bank of London, according to Sky News.

Sources suggested that the government-backed British Business Bank (BBB), which supports economic development, might step in. BBB said it ‘will continue to assess the situation.’

One senior banker suggested US venture capital firm Bessemer Partners as a possible buyer.

Experts believe the risks of further bank failures are low because the US parent company had a distinctive business model, with very large amounts of government bonds on its balance sheet, which made it vulnerable to rising interest rates.

It went to the wall on Friday after it was forced to sell bonds at a £1.5 billion loss when customers wanted their money out.

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