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Chancellor in crisis talks on Silicon Valley Bank meltdown

Signature: The sudden collapse of SVB's US parent company sent shockwaves through global markets

Chancellor in crisis talks over tech bank meltdown: Ministers and officials scramble to find buyer as UK branch of Silicon Valley Bank shuts down

  • Collapse of the biggest bank failure of the American parent company of SVB since the financial crisis of 2008
  • The UK arm is primed 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 announced plans to put the UK arm of US lender Silicon Valley Bank (SVB) out of business.

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

The UK arm of SVB will be bankrupted by the Bank of England from tonight barring any significant new developments. Bank officials are scrambling to find a buyer to minimize disruption to business customers and risk to the financial system.

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

MP Andrew Griffith, Economic Secretary to the Treasury, hosted a roundtable with businesses yesterday afternoon.

Signature: The sudden collapse of SVB's US parent company sent shockwaves through global markets

Signature: The sudden collapse of SVB’s US parent company sent shockwaves through global markets

Founded in 1982, SVB was Silicon Valley’s largest bank and specialized in lending to tech start-ups. SVB’s insolvency plans in the UK would trigger a compensation scheme which would pay out up to £85,000 of customer deposits or £170,000 for joint accounts. Above all, 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 fall, confirmed by its UK chief executive Erin Platts in a post on its website, has sparked alarm in the UK’s close-knit tech community.

Some 210 representatives of companies employing 10,000 people last night signed an open letter to the Treasury saying the implosion of SVB posed an ‘existential threat’ to Britain’s tech sector. He said “the majority of the most exciting and dynamic tech companies do business with SVB” and added that some were doing the math to see if they were already technically insolvent.

Joe Healey, chief executive of fledgling biotech company NanoSyrinx, said the company had £3.5m in the bank which it could not access. He added: “At the moment we don’t even have enough money in the business to end it in an orderly fashion if that’s what we have to do.”

“We got access to the SVB website on Friday, but it is now fully locked.”

Russ Shaw, founder of industry group Tech London Advocates, said: “The Treasury needs to look at this and say 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 that Treasury officials have contacted the affected companies. They are believed to be asking them to provide details of 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 the failure of Silicon Valley Bank UK is handled smoothly and any disruption is minimised. He added that the situation at SVB had no implications for other UK banks and that the system was “strong and resilient”.

Interviews: Erin Platts, Managing Director of SVB UK

Interviews: Erin Platts, Managing Director of SVB UK

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

Sources have suggested 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 has suggested US venture capital firm Bessemer Partners as a potential buyer.

Experts say 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. interest.

He went to the wall on Friday after being forced to sell bonds at a loss of £1.5billion when customers wanted their money.

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