SVB contagion: UK branch closes, government scrambles and startups prepare for the worst

Thursday evening and Friday morning, the fallout from the shutdown of Silicon Valley Bank in the US had reached shores in the UK and Europe. Yesterday afternoon, the Bank of England sought a court order to place Silicon Valley Bank UK Limited - the UK arm of the US institution - in insolvency proceedings.

In a statement, the BoE said: "SVB UK has a limited presence in the UK and no critical functions support the financial system. In the meantime, the business will cease making payments or accept deposits.SVB UK have confirmed that they will be in bankruptcy from this Sunday evening (tomorrow).

The move could affect up to 30% of UK tech startups, with potentially 10% struggling, industry sources say.

As of today, TechCrunch understands that an influential group of UK entrepreneurs and investors, aided by industry body Coadec, are now making hasty representations this weekend to the UK Treasury on the implications of the shutdown. from SVB UK.

Furthermore, a group of VCs released the following statement, which reads: "SVB-UK is a trusted and valued partner to the entire innovation ecosystem that powers founders and venture capital industry. It plays a pivotal role in supporting and funding UK startups. In the event that SVP-UK were to be purchased and capitalized appropriately, we would strongly support and encourage our portfolio companies to take over their banking relationships with them."

Joint Investor Statement British on the closure of SVB-UK

It is understood that the UK Prime Minister's Office, Number 10 Downing Street, is working over the weekend to assess the impact on its tech industry.

In addition, some 210 CEOs and founders of UK Tech (which employ around 10,000 people) have written to the Chancellor about it.

And in a breaking development, Sky News has reported that the Bank of London (TBOL) (a clearing bank) is considering a bailout bid for SVB UK.

The collapse of the US bank came after it tried to raise $2.25 billion to offset losses from the sale of (mostly) US government bonds, causing the price to crash of the stock by 60%, with customers and investors then rushing in droves to empty their accounts.

Up to Friday morning, there was no obvious threat to the UK operation from the fallout in the US. SVB UK was legally and operationally an autonomous entity of the American branch. (SVB UK obtained a UK banking license in 2012, but became a standalone UK bank in August 2022 and has 700 full-time staff).

Furthermore, after the 2008 financial crisis, all UK banks were required by law to separate core retail banking services from their investment and international banking activities as part of what is calls it "ring-fencing".

However, on Friday morning the Financial Times reported that SVB UK had requested £1.8 billion in cash from the BoE, which can provide emergency funding to a bank, provided it has adequate guarantees, via the BoE's discount window. .

Also on Friday, SVB UK CEO Erin Platts held a Zoom call with hundreds of UK investors and...