Britain’s finance ministry and the Bank of England are working
together to minimize the disruption that could stem from a collapse
of the UK arm of Silicon Valley Bank, which has been seized by US
regulators, the ministry said on Saturday, Trend reports citing
Al
Arabiya.
Talks were scheduled for later on Saturday to discuss the issues
faced by British tech companies affected by the collapse, the
ministry said in a statement.
“The government recognizes that tech sector companies are often
not cashflow-positive as they grow, and that they rely on cash on
deposits to cover their day to day costs,” the statement said.
The ministry said Britain’s banking system remained strong and
resilient, adding that the issues affecting Silicon Valley Bank
were specific to it and did not have implications for other banks
operating in the UK.
More than 250 UK tech firm chief executives signed a letter
addressed to Jeremy Hunt, the British chancellor of the exchequer
(finance minister), calling for government intervention, a copy
seen by Reuters shows.
“The recent news about SVB going into insolvency represents an
existential threat to the UK tech sector,” the letter said.
“This weekend the majority of us as tech founders are running
numbers to see if we are potentially technically insolvent.”
“Most businesses are operating on very fine margins in the
current economy and the contagion from the initial insolvencies
will be vast and impact the economy far beyond the tech sector,”
the letter said.
Sky News had reported earlier on Saturday that a British
clearing bank, the Bank of London, was considering a rescue bid for
the UK arm of SVB.
The Bank of England on Friday said it was seeking a court order
to place SVB UK into an insolvency procedure after US regulators
took over its parent company SVB Financial Group.
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.
Britain’s Department for Science, Innovation and Technology is
also talking to the affected tech firms. A further statement will
be issued after the talks on Saturday.
Susannah Streeter, head of money and markets at the investment
firm Hargreaves Lansdown, said in an emailed note that there would
be aftershocks in the tech sector next week.
“Urgent talks regarding potential takeovers will be ongoing,
with regulators under pressure to negotiate bailouts to avoid
further damaging fallout,” Streeter said.
