Britain battles to limit SVB damage  

Prime Minister Rishi Sunak on Sunday said his government was working to limit any fallout for companies from the bank’s demise…reports Asian Lite News

A would-be buyer for the British arm of failed Silicon Valley Bank (SVB) stepped forward on Sunday as the fallout from the collapsed US start-up-focused lender reverberated around the world.

The Bank of London said it had submitted a formal proposal to the British arm of SVB, as well as to the authorities, including the Treasury and the Bank of England (BOE).

Canada’s banking regulator, meanwhile, seized control of SVB’s branch in Toronto on Sunday and said it would seek a legal order to wind up the operation. The branch in Canada mainly lends to corporate clients, and does not hold any commercial or retail deposits.

In Hong Kong, more than a dozen listed companies have stepped forward to say they had little or no exposure to SVB.

Friday’s dramatic failure of SVB Financial Group, the parent company of SVB, was the biggest bank collapse in the United States since the 2008 financial crisis.

Prime Minister Rishi Sunak on Sunday said his government was working to limit any fallout for companies from the bank’s demise.

The collapse could have a significant impact on British technology companies, given the importance of the lender to some customers, Finance Minister Jeremy Hunt said earlier on Sunday,

Bank of London, a clearing bank, said it was leading a consortium of private equity firms in making the approach.

“Silicon Valley Bank cannot be allowed to fail given the vital community it serves,” Bank of London co-founder and chief executive Anthony Watson said.

SoftBank-owned OakNorth Bank is also weighing a bid to buy SVB UK, a person with knowledge of the talks told Reuters, confirming an earlier Sky News report. Abu Dhabi state-backed investment vehicle ADQ is also looking.

The BOE has said it is seeking a court order to place the British arm of SVB in insolvency. Meanwhile, advisory firm Rothschild & Co was exploring options for the subsidiary, two people familiar with the discussions told Reuters on Saturday.

Sunak said he understood “the anxiety and the concerns customers of the bank have”.

He and the government were “making sure we can work to find a solution that secures people’s operational liquidity and cash flow needs”, he said.

Earlier, Hunt said that efforts were focused on finding a “longer-term solution that minimises, or even avoids completely, losses to some of our most promising companies. We will bring forward very soon plans to make sure people are able to meet their cash flow requirements to pay their staff.” 

The government was weighing involving the British Business Bank (BBB) to help SVB UK’s customers, said one person, to help address firms’ cash needs. The BBB is government-owned but independently managed, specialising in supporting start-up firms. During the pandemic, it ran state-backed loan programmes.

Banks including Lloyds Banking Group and NatWest Group had been approached to see if an emergency takeover deal can be reached, people familiar with the matter told Reuters.

But an executive at a major British bank said it was unlikely a High Street lender would buy SVB UK because its credit products would not be a good fit for a mainstream bank.

More than 250 British tech firm executives signed a letter addressed to Mr Hunt on Saturday, calling for government intervention and warning of an “existential threat” to the British tech sector, a copy seen by Reuters showed.

Under insolvency proceedings for banks in Britain, some depositors are eligible for up to £85,000 (S$138,600) of compensation, or £170,000 for joint accounts.

Customers may not be able to recover deposits in excess of those sums, which are small relative to the deposits some start-ups have with the bank. Hunt reiterated comments by the BOE that, overall, SVB had a limited presence in Britain and did not perform functions critical to the financial system.

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