Salem Radio Network News Sunday, April 2, 2023

Business

UK races to minimise damage from Silicon Valley Bank collapse

By Andrew MacAskill

LONDON (Reuters) -Prime Minister Rishi Sunak said on Sunday the British government was working to find a solution to limit the potential hit to companies resulting from the failure of U.S. lender Silicon Valley Bank and its UK subsidiary.

Sunak said he understood “the anxiety and the concerns customers of the bank have”, in comments made to reporters flying with him to the United States. 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.

Friday’s dramatic failure of the SVB Financial Group, which focuses on tech startups, was the biggest bank collapse in the U.S. since the 2008 financial crisis.

Potential bidders for SVB’s UK subsidiary have been contacted, people familiar with the conversations told Reuters.

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,

“We’ve been working at pace over the weekend, through the night,” Hunt told Sky News. “We will bring forward very soon plans to make sure people are able to meet their cashflow requirements to pay their staff.”

Hunt said efforts are focused on finding a “longer-term solution that minimises, or even avoids completely, losses to some of our most promising companies.”

The Financial Times reported that the British government was trying to get a buyer for the takeover of Silicon Valley Bank UK Ltd and a Middle Eastern buyer has expressed interest. The “lead white knight” was a United Arab Emirates-based company as of last night, the FT said.

Advisory firm Rothschild & Co is exploring options for the subsidiary, as insolvency looms, two people familiar with the discussions told Reuters on Saturday. The BoE has said that it is seeking a court order to place the UK arm into an insolvency procedure.

Lenders including Barclays PLC and Lloyds Banking Group are among parties that have been approached by the board of SVB UK over the weekend to see if an emergency takeover deal can be reached, Sky News reported on Sunday. NatWest Group has also been approached, a person familiar with the matter told Reuters.

Bank of London, a clearing bank, is weighing whether an offer is possible, a person with knowledge of the discussions told Reuters.

SVB Group declined a Reuters request for comment while Barclays and Lloyds Banking did not immediately respond.

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

Under insolvency proceedings for banks in Britain, some depositors are eligible for up to 85,000 pounds ($102,000) of compensation for cash held at lenders, or 170,000 pounds for joint accounts. Customers may not be able to recover deposits in excess of those sums, which are small relative to the deposits some startups had with the bank.

Hunt reiterated comments by the BoE that overall, Silicon Valley Bank had a limited presence in Britain and did not perform functions critical to the financial system.

The pledge to find emergency support was welcomed by tech firms and lobby groups, including the startup industry body Codec, calling it “an acknowledgement of the scale of the challenge”.

The opposition Labour shadow chancellor Rachel Reeves urged Hunt to offer more than “warm words” to companies, saying the government had to come up with a plan by the time financial markets opened on Monday morning.

Sunak has said he wants to turn Britain into the “next Silicon Valley”. Britain is behind only the United States and China in terms of the level of venture capital funding for the sector, according to the government.

In the U.S., the Federal Deposit Insurance Corporation (FDIC), which was appointed receiver, was trying to find another bank over the weekend that was willing to merge with Silicon Valley Bank, people familiar with the matter said on Friday, to minimise the fallout.

Some financial industry executives and investors are growing increasingly concerned that the collapse of the bank could have a domino effect on other U.S. regional banks if regulators did not find a buyer over the weekend to protect uninsured deposits.

($1 = 0.8314 pounds)

(Reporting by Andrew MacAskill and William Schomberg; Additional reporting by Elizabeth Piper, Lawrence White, Iain Withers, Baranjot Kaur and Sinead Cruise; Editing by Elisa Martinuzzi and Frank Jack Daniel;)

Previous
Next

Editorial Cartoons

View More »

Steve Breen
Mon, Mar 20, 2023

X CLOSE