Following an initial statement that it held a separate balance sheet from Silicon Valley Bank (NASDAQ:SIVB) in the US, Silicon Valley Bank UK has announced it will move into insolvency following a discussion with UK banking regulators. SVB UK took on a similar role to its US sister bank supporting startups and venture backed firms.
A statement on the bank’s homepage explains:
“We are announcing that following conversations with the Prudential Regulation Authority there is an intention, barring any intervening event, to put Silicon Valley Bank UK Limited into insolvency from Sunday evening. We are determined to work on the behalf of our clients and are proud of our employees in their engagement with you. If clients have any questions please get in touch with us and we will try our best to answer any and all of your queries.”
On Friday, SVB UK CEO Erin Platts issued the following statement:
“As a reminder, Silicon Valley Bank UK is a standalone entity with its own balance sheet and governance structure. SVB has supported investors and innovators for 40 years and we have been so humbled with the consistent drum of support coming from our UK investor and founder community in last few days. We appreciate that this is a concerning time for our clients so we are working tirelessly to support them and give more context”
The Bank of England, the entity that oversees the PRA, posted a statement regarding the bank’s insolvency:
“The Bank of England, absent any meaningful further information, intends to apply to the Court to place Silicon Valley Bank UK Limited (‘SVBUK’) into a Bank Insolvency Procedure. A Bank Insolvency Procedure would mean that eligible depositors are paid out by the FSCS as quickly as possible up to the protected limit of £85,000 or up to £170,000 for joint accounts. SVBUK’s other assets and liabilities would be managed in the insolvency by the bank liquidators and recoveries distributed to its creditors. SVBUK has a limited presence in the UK and no critical functions supporting the financial system. In the interim, the firm will stop making payments or accepting deposits.”
In reaction to the news of the insolvency, 140 tech founders and CEOs appealed to Jeremy Hunt, Chancellor of the Exchequer, requesting an intervention on their behalf.
140 UK tech companies have written to the Chancellor today to ask for support following the collapse of SVB UK ⬇️ pic.twitter.com/eb7pwhMO9I
— Katie Prescott (@kprescott) March 11, 2023
The letter notes that SVB UK’s insolvency represents an “existential threat to the UK tech sector” as the majority of these firms hold money at the bank. The letter adds that the degree of the loss could cripple the startup ecosystem and set things back by 20 years, adding that if the UK tech sector sneezes, the rest of the economy will catch a cold and worse.”
“It is vital that the government looks to intervene to ensure the continued success of the sector,” as many of these firms may be forced into liquidation.
The UK is home to the most vibrant innovation ecosystem in Europe and a top Fintech hub. During the COVID crisis, the government moved to protect early-stage firms, so it is not out of the question for the UK government to act quickly and backstop the bank. At the same time, the US federal government has been slow to come up with a remedy that could resolve everyone’s issue, which was predicated by fast-rising interest rates that diminished the value of high-duration assets held by the bank. Some have called on the US federal government to do something beyond winding down the bank’s operations.