British tech sector ‘at serious risk’ after SVB collapse, warns government
BRITAIN’S technology and life sciences sectors are at “serious risk” following the closure of the Silicon Valley Bank, Chancellor Jeremy Hunt warned on Sunday (Mar 12).
The California-based SVB, which was closed by US authorities last Friday, manages the money of some of the UK’s most promising businesses, Hunt said.
“There is a serious risk to our technology and life sciences sectors, many of whom bank with this bank,” Hunt said in an interview with British television channel Sky News.
“Most people won’t have heard of the Silicon Valley Bank but it happens to look after the money of some of our most promising and exciting businesses.”
The bank is expected to reopen on Monday under a new name with the US deposit guarantee agency, the Federal Deposit Insurance Corporation, taking control.
Hunt said the governor of the Bank of England (BOE) had made it “very clear” that there was no systemic risk to the UK’s financial system due to the SVB’s collapse.
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Hunt said on Sunday he was working with Prime Minister Rishi Sunak and BOE governor Andrew Bailey to “avoid or minimise damage” resulting from the chaos engulfing the UK arm of SVB.
“We’ve been working at pace over the weekend, through the night,” Hunt told Sky News. “We will bring forward very soon plans to make sure people are able to meet their cashflow requirements to pay their staff.”
Hunt said efforts are focused on finding a “longer-term solution that minimises, or even avoids completely, losses to some of our most promising companies”.
Advisory firm Rothschild & Co is exploring options for the UK arm, called Silicon Valley Bank UK, as insolvency looms, two people familiar with the discussions told Reuters on Saturday. The BOE has said that it is seeking a court order to place the UK arm into an insolvency procedure.
Lenders including Barclays and Lloyds Banking Group are among parties to have been approached by the board of SVB UK over the weekend to see if an emergency takeover deal can be reached, Sky News reported on Sunday.
Bank of London, a clearing bank, is weighing whether an offer is possible, a source with knowledge of the discussions told Reuters.
The British Treasury said on Saturday that SVB’s problems were “specific to the firm” and had no “implications for other banks operating in the UK”.
The bank failed after its customers – mainly from the tech sector – made massive withdrawals, and after its latest attempt to raise new money proved unsuccessful.
Little known to the general public, SVB specialised in financing startups and had become the 16th-largest US bank by assets.
Its demise is not only the largest bank failure since Washington Mutual in 2008, but also the second-largest retail bank failure in the US.
The BOE said it intended to pursue insolvency with regard to the bank’s British subsidiary.
“It was looking inevitable that the dramatic loss of confidence in SVB would also sweep its UK arm into insolvency,” said Susannah Streeter of financial firm Hargreaves Lansdown.
“The run on the US bank spooked customers banking with the British subsidiary, despite protestations that it was ring-fenced from its parent,” she added. AFP
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