Britain’s tech and life sciences sectors are “at grave risk” following the shutdown of the Silicon Valley Bank, the chancellor, Jeremy Hunt, warned Sunday.
“There is a serious risk to our technology and life sciences sectors, many of whom bank with this bank,” Hunt said in an interview with British television channel Sky News. “Most people won’t have heard of the Silicon Valley Bank but it happens to look after the money of some of our most promising and exciting businesses.”
The California-based SVB Bank, closed on Friday by U.S. authorities, managed the cash of some of Britain’s most promising businesses, Mr Hunt said.
The bank is expected to reopen on Monday under a new name, with US deposit-guarantee agency, the FDIC, taking over.
Hunt said that the governor of the Bank of England had made “very clear” there was no systemic risk to the British financial system from SVBs collapse.
The Government will put forward plans “very shortly” to make sure that people can meet their cash flow needs and pay staff. It will also bring in a longer-term solution that minimizes, or entirely avoids, losses for British firms, she added.
The UK Treasury said on Saturday the problems with failed SVB Bank were “specific to that firm” and had “no implications for other banks operating in Britain.”
The bank failed after customers, mostly in the technology industry, made large-scale withdrawals, and after its last-ditch efforts to raise fresh capital failed, California regulators took the bank over.
SVB was focused on financing startups, and had grown into the 16th-largest U.S. bank by assets.
Its collapse was not only the largest bank failure since Washington Mutual in 2008, it was the second-largest bank failure for a retail customer in the United States.
The Bank of England said it plans to seek an insolvency judgment against the bank’s UK subsidiaries.
“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.
Sky News reported the London-based Bank, launched only two years ago, was among those considering an offer to take over SVBs British division.