The problems of the failed SVB bank were “specific to the firm” and had no “implications for other banks operating in the UK,” the British Treasury said Saturday.
The UK banking system, one of the largest in the world, “remains strong and resilient,” the finance ministry said in a press release, adding the government was meeting with representatives of the technology sector to address their concerns.
US authorities closed the California-based Silicon Valley Bank (SVB) on Friday with the US deposit guarantee agency, the FDIC, taking control.
The bank is expected to reopen on Monday under a new name.
Finance minister Jeremy Hunt spoke to the governor of the Bank of England on Saturday morning regarding Silicon Valley Bank UK, the US bank’s UK subsidiary, to ensure that its failure “is managed smoothly, and that any disruption is minimised”.
Treasury officials have been speaking to firms affected and held a roundtable with industry representatives on Saturday “to discuss the situation and the worries they face”, added the statement.
“The government recognises that tech sector companies are often not cashflow positive as they grow, and that they rely on cash deposits to cover their day-to-day costs,” it said.
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 start-ups 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 Bank of England said it intended to pursue insolvency with regards 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.
British television channel Sky News reported that the Bank of London, which launched just two years ago, is among those mulling a bid for the bank’s British arm.
(Except for the headline, this story has not been edited by String Reveals staff and is published from a syndicated feed.)
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