Collapse of Silicon Valley Bank hits Europe – updated
The collapse of Silicon Valley Bank (SVB) in the US on Friday has hit the UK subsidiary hard, which had previously said it was a standalone operation.
The US bank, which had $209bn of assets including $174bn in deposits, was taken over by Federal regulators on Friday. This followed a run on the bank where customers, mainly venture capital funds and tech startups, all wanted to take out their money.
On Friday morning, the chief executive of Silicon Valley Bank UK held a Zoom call with customers saying the funds in the UK were ringfenced and not vulnerable to the run in the US. However this did not reassure customers, and by Friday afternoon the UK bank was put into regulation by the Bank of England, preventing customers withdrawing funds. The bank said it expects to be made insolvent on Sunday afternoon.
The US bank is expected to be taken over by another bank on Monday, securing the deposits, although tech firms there are expected to have limited access to funds for some time which may be a problem paying staff. VC Vinod Khosla, founder of Sun Microsystems, is talking to over 100 of the companies backed by his $15bn fund to provide bridging loans to cover this.
However the situation for the UK and Europe looks a lot more severe. The insolvency would mean that deposits are only covered to £85,000 ($100,000), with the rest, which would be millions of pounds for some funds and startups, to be recovered as part of a long, drawn out process.
UK’s Exchequer is asking for any firms with potential problems to contact them with details of their cash burn.
The UK bank had recently expanded into Sweden and had offices in Germany, Denmark and Israel. Staff in the UK have already been laid off.
Over 140 venture capital firms have written an open letter of support for SVB in the UK, saying it is a trusted and valued partner of the entire innovation ecosystem, powering founders and the venture capital industry. These include Atomico, Sie Ventures and Accel.
Having a local bank with expertise in the tech industry was a key step in supporting technology startups in Europe.
Monday update
After negotiations over Saturday and Sunday, the US government is bailing out the bank, making good all deposits for Monday morning. The senior management team will leave.
In the UK, the Bank of England and UK government announced that HSBC will buy SVB-UK after several organisations bid for the operation on Sunday evening. This should avoid the collapse of the bank for tech companies across Europe.
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