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Britain battles to limit SVB damage as would-be buyer for UK arm steps in


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Britain battles to limit SVB damage as would-be buyer for UK arm steps in

SVB. People gather outside of the Silicon Valley Bank headquarters in Santa Clara, California, March 10, 2023.

Nathan Frandino/Reuters

(2nd UPDATE) Bank of London submits a formal proposal to the UK arm of Silicon Valley Bank

LONDON, United Kingdom – A would-be buyer for the UK arm of failed US lender Silicon Valley Bank (SVB) stepped forward on Sunday, March 12, as British Prime Minister Rishi Sunak said his government was working to limit any fallout for companies from the bank’s demise.

Bank of London said it had submitted a formal proposal to the UK arm of SVB, as well as sending it to authorities, including the Treasury and the Bank of England (BoE).

The dramatic failure on Friday, March 10, of SVB Financial Group, which focuses on tech startups, was the biggest bank collapse in the US since the 2008 financial crisis.

The collapse could have a significant impact on British technology companies, given the importance of the lender to some customers, finance minister Jeremy Hunt said earlier on Sunday.

Bank of London, a clearing bank, said it was leading a consortium of private equity firms in making the approach.

“Silicon Valley Bank cannot be allowed to fail given the vital community it serves,” Bank of London co-founder and chief executive officer Anthony Watson said.

SoftBank-owned lender OakNorth Bank is also weighing a bid to buy SVB UK Ltd, a person with knowledge of the talks told Reuters, confirming an earlier Sky News report. Abu Dhabi state-backed investment vehicle ADQ is also looking, Sky reported.

The BoE has said it is seeking a court order to place the UK arm of SVB into insolvency.

Meanwhile, advisory firm Rothschild & Co. was exploring options for the subsidiary, two people familiar with the discussions told Reuters on Saturday, March 11.

Sunak said he understood “the anxiety and the concerns customers of the bank have,” in comments made to reporters flying with him to the United States. He and the government were “making sure we can work to find a solution that secures people’s operational liquidity and cash-flow needs,” he said.

On arrival in San Diego, Sunak told reporters he had been working over the weekend and during his flight from London with his finance minister, the BoE, and regulators on “finding the best solution.”

Earlier, Hunt told Sky News that efforts were focused on finding a “longer-term solution that minimizes, or even avoids completely, losses to some of our most promising companies.”

“We will bring forward very soon plans to make sure people are able to meet their cash-flow requirements to pay their staff,” Hunt said.

The government is weighing involving the British Business Bank to help SVB’s customers, said one person, to help address firms’ cash needs. The BBB is government-owned but independently managed, specializing in supporting startup firms. During the pandemic it ran the state-backed loans programs.

Banks including Lloyds Banking Group and NatWest Group had been approached to see if an emergency takeover deal can be reached, people familiar with the matter told Reuters.

But an executive at a major UK bank said it was unlikely a high street lender would buy SVB UK because its credit products would not be a good fit for a mainstream bank.

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Existential threat

More than 250 UK tech firm executives signed a letter addressed to Hunt on Saturday calling for government intervention and warned of an “existential threat” to the UK tech sector, a copy seen by Reuters shows.

Under insolvency proceedings for banks in Britain, some depositors are eligible for up to 85,000 pounds ($102,000) of compensation for cash held at lenders, or 170,000 pounds for joint accounts.

Customers may not be able to recover deposits in excess of those sums, which are small relative to the deposits some startups had with the bank.

Hunt reiterated comments by the BoE that overall, SVB had a limited presence in Britain and did not perform functions critical to the financial system.

The pledge to find emergency support was welcomed by tech firms and lobby groups, including the startup industry body Codec, calling it “an acknowledgment of the scale of the challenge.”

OakNorth CEO Rishi Khosla told Reuters earlier this month – before SVB’s implosion – the bank could make a “nine-figure” acquisition in cash given its reserves, and that it was looking at potentially buying another bank in Britain.

Opposition Labour shadow finance minister Rachel Reeves urged Hunt to offer more than “warm words,” saying the government had to come up with a plan before financial markets open on Monday, March 13.

Sunak has said he wants to turn Britain into the “next Silicon Valley.” Britain is only behind the United States and China in terms of the level of venture capital funding for the sector, according to the government.

In the US, authorities stepped in with a series of emergency measures to shore up confidence in the banking system.

Some financial industry executives and investors had grown increasingly concerned that the collapse of the bank could have a domino effect on other US regional banks. –

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