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Chancellor in crisis talks over Silicon Valley Bank merger

Chancellor in crisis talks over tech bank collapse: Ministers and officials scramble to find a buyer as UK arm of Silicon Valley Bank closes

  • Collapse of the largest bank failure of SVB’s US parent since the 2008 financial crisis
  • UK arm set for insolvency unless there are significant new developments
  • BoE officials scramble to find a buyer to minimize disruption

Britain’s tech industry is locked in crisis talks with the government after the Bank of England said it intends to declare the UK arm of US lender Silicon Valley Bank (SVB) insolvent.

The sudden collapse of SVB’s US parent shocked global markets as it became the biggest bank failure since the 2008 financial crisis.

SVB’s UK division will be declared bankrupt by the Bank of England from tonight, unless there is significant development. Bank officials strive to find a buyer in order to minimize disruption to business customers and risks to the financial system.

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

Andrew Griffith MP, Economic Secretary to the Treasury, held a business roundtable yesterday afternoon.

Firm: Sudden collapse of SVB’s US parent sent shockwaves through global markets

Founded in 1982, SVB was the largest bank in Silicon Valley, specializing in lending to start-up technology companies. Plans for SVB’s insolvency in the UK would trigger a compensation scheme that pays up to £85,000 from client 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 had “no critical functions supporting the financial system.” But the speed of its fall, confirmed by its UK chief executive, Erin Platts, in a post on her website, raised alarm in the UK tech community.

Some 210 representatives of companies employing 10,000 people signed an open letter to the Treasury last night claiming that the implosion of SVB posed an “existential threat” to the UK tech sector. He said “most of the most interesting and dynamic tech companies bank with SVBs” adding that some were crunching numbers to see if they were already technically insolvent.

Joe Healey, chief executive of biotech start-up NanoSyrinx, said the company has £3.5m in the bank that it cannot access. He added: ‘Right now, we don’t even have enough money in the company to finish in an orderly fashion if that’s what we needed to do.

“We had access to the SVB website on Friday, but now it is completely blocked.”

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 £24bn in funding last year.

Treasury officials are understood to have contacted the affected businesses. They are believed to be asking for details about 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 the failure of Silicon Valley Bank UK is managed smoothly and any disruption is minimized.” He added that the situation at SVB had no implications for other UK banks and that the system is “strong and resilient.”

Talks: Erin Platts, UK SVB CEO

Talks: Erin Platts, UK SVB CEO

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

The sources suggested that the government-backed British Business Bank (BBB), which supports economic development, could step in. BBB said it “will continue to assess the situation.”

A 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, making it vulnerable to rising rates. of interest.

It collapsed on Friday after it was forced to sell bonds at a loss of £1.5bn when clients wanted their money out.