‘Crisis’ fears after bank collapses
FEARS of a disastrous financial ripple effect that could force UK tech companies out of business were rising yesterday following the collapse of a major American bank.
A group of 140 British firms with 8,000 employees have written to the Chancellor pleading for support after US regulators seized the estimated £195billion assets of Silicon Valley Bank – which also had deposits in excess of £160billion – after a run that saw investors racing to withdraw their money last week.
The UK arm of SVB is set to be declared insolvent tomorrow by the Bank of England after the collapse of its US parent company.
The Bank of England stepped in on Friday after SVBUK asked for a short-term “emergency” loan of £1.8billion. The UK tech companies’ letter, made public on Twitter, urged the Chancellor to intervene to avert a domino effect they fear could put some of them out of business.
The letter said there was “panic” among members, adding: “It is vital that the Government looks to intervene to ensure the continued success of the sector.”
It warned of potential closures and job cuts that could set the industry “back 20 years”, adding: “For many of us who were holding most or all of our funds with SVB, we will not be able to wait and risk being forced into involuntary liquidation before that money comes back.”
A Treasury spokesperson said: “We are working with the Bank of England to ensure Silicon Valley Bank UK’S failure is managed smoothly and any disruption is minimised.”
SVB, America’s 16th largest bank, could not cope with the massive withdrawals, and efforts to raise fresh investments failed before federal authorities took control on Friday.
The move sparked share losses of more than £40billion across the banking sector.
US Treasury Secretary Janet Yellen said she had “full confidence” that regulators will take appropriate action to ensure the sector remains “resilient”, despite serious liquidity issues.
Other major banks, however, could collapse, experts have warned, with several in turmoil – including First Republic and Signature Bank.