The sudden collapse of California-based Silicon Valley Bank (SVB), which focuses on tech startups, is having repercussions far beyond the U.S.
As of Sunday (March 12), the Bank of England (BoE) had placed Silicon Valley Bank UK Limited — the U.S. institution obtained a U.K. banking license in 2012 — into an insolvency procedure to minimize damage from the collapse and protect U.K. firms from major losses.
In a March 10 statement published on its website, the BoE explained that a bank insolvency procedure would enable eligible depositors to quickly recover up to £85,000 (about $102,600) of compensation from the country’s Financial Services Compensation Scheme (FSCS) or up to £170,000 (about $205,000) for joint accounts.
The BoE added that SVB UK, “has a limited presence in the U.K. and no critical functions supporting the financial system. In the interim, the firm will stop making payments or accepting deposits.”
According to CNBC, talks were held over the weekend between British finance minister Jeremy Hunt, Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey to discuss the consequences of the shutdown on British tech companies after more than 250 U.K. tech CEOs signed a letter addressed to Hunt on Saturday calling for the government to intervene.
“We will bring forward immediate plans to ensure the short-term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met,” Hunt said, per CNBC, adding that the government was treating the issue as a “high priority.”
In the meantime, the Bank of London (TBOL), alongside a group of private equity firms, has submitted a formal bid to U.K. authorities including the Treasury and the Bank of England to buy SVB’s U.K. subsidiary, Sifted reported on March 12.
“Silicon Valley Bank cannot be allowed to fail given the vital community it serves. This is a unique opportunity to ensure the U.K. has a more diversified banking sector, whilst allowing continuity of service to SVB’s U.K. client base,” Anthony Watson, group CEO and founder of the clearing bank, said in a statement, per the report. “It would be deeply disappointing for this moment to lead to further consolidation of power among big banks.”
According to multiple reports, other potential buyers are also expected to make a bid in the coming days, including U.K. challenger bank OakNorth and British multinational banks Barclays and HSBC.
According to a report from The Guardian, a United Arab Emirates (UAE) investment firm, Royal, whose customers include payments firm Wise and cybersecurity firm Darktrace, is another contender in the race after expressing interest in acquiring the U.K. arm of the U.S. lender.
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