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The Bank of England has moved to put the UK arm of Silicon Valley Bank into resolution after it applied for £1.8bn of liquidity as its parent company was collapsing on Friday, triggering concern among British start-ups and investors, the Financial Times reported on Saturday.
The BoE said in a late-night statement Friday that it planned to use its bank insolvency procedure which allows depositors to be paid up to £85,000 as quickly as possible from the deposit insurance scheme. Liquidators will manage the remaining British assets and distribute them to creditors, including large depositors.
Financial advisory firm Interpath will be the likely administrator for the insolvency, according to two people familiar with the matter, the FT reported. Interpath declined to comment.
“SVB UK has a limited presence in the UK and no critical functions supporting the financial system,” the BoE said, after US regulators took over the American parent company on Friday. It added that the firm would stop making payments or accepting deposits.
The decision to call time on SVB UK was taken after the bank applied to the BoE’s discount window, which offers short-term funding to banks, for £1.8bn on Friday.
SVB Financial Group’s Silicon Valley Bank
SIVB,
on Friday become the first major bank since the global financial crisis in 2008 to be taken over by the U.S. Federal Deposit Insurance Corp. in a sudden demise for a once-mighty lender to technology companies in its namesake region.
See: Silicon Valley Bank becomes biggest bank since 2008 financial crisis to be taken over by FDIC
SVB’s UK arm had no immediate comment.
Group messaging apps shared by UK venture capitalists erupted at the news and the Bank of England’s comments, especially as many had been reassured only hours earlier by executives at SVB that the UK entity was “ringfenced” from its US parent.
British investors are anxious about their portfolio companies, some of which had tried without success to withdraw funds on Friday. Many fear that dozens of UK start-ups will go under if the government does not step in to save SVB.
Created in 2012 as SVB’s first overseas branch, the UK arm became a subsidiary last August.
In a statement published on its website, SVB UK said that after “conversations” with UK financial regulator 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.”
The U.K. Treasury said: “We are working with the Bank of England to ensure that Silicon Valley Bank UK’s failure is managed smoothly, and that any disruption is minimised.”
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