The Bank of England has moved to put the UK arm of Silicon Valley Bank into resolution after it applied for £1.8bn of liquidity as its parent company was collapsing on Friday, triggering “panic” among British start-ups and investors.
The BoE said in a late-night statement that it planned to use its bank insolvency procedure which allows depositors to be paid up to £85,000 as quickly as possible from the deposit insurance scheme. Liquidators will manage the remaining British assets and distribute them to creditors, including large depositors.
Financial advisory firm Interpath has been lined up as the likely administrator for the insolvency, according to two people familiar with the matter. Interpath declined to comment.
“SVB UK has a limited presence in the UK and no critical functions supporting the financial system,” the BoE said, after US regulators took over the American parent company on Friday. It added that the firm would stop making payments or accepting deposits.
The decision to call time on SVB UK was taken after the bank applied to the BoE’s discount window, which offers short-term funding to banks, for £1.8bn on Friday.
SVB’s UK arm had no immediate comment. On Friday afternoon, SVB UK posted a statement on Twitter stressing that it was a “standalone independent banking institution”.
“We appreciate that this is a concerning time for our clients so we are working tirelessly to support them and give more context,” Erin Platts, chief executive of SVB UK, said in a statement. The tweet has since been removed.
Group messaging apps shared by UK venture capitalists erupted at the news and the Bank of England’s comments, especially as many had been reassured only hours earlier by executives at SVB that the UK entity was “ringfenced” from its US parent.
British investors are anxious about their portfolio companies, some of which had tried without success to withdraw funds on Friday. Many fear that dozens of UK start-ups will go under if the government does not step in to save SVB.
Coadec, a lobby group representing UK tech start-ups, said on Saturday there was “panic” among its members.
“We know that there are a large number of start-ups and investors in the ecosystem who have significant exposure to SVB UK and will be very concerned,” said Dom Hallas, Coadec executive director. “We have been engaging with the UK government including Treasury and No10 about the potential impact and I know that work has been going on overnight on policy options.”
Created in 2012 as SVB’s first overseas branch, the UK arm became a subsidiary last August. It boasted a team of 700 people across Europe, the Middle East and Africa, according to a tweet from the UK bank’s official account at an awards ceremony last week.
In a statement published on its website, SVB UK said that after “conversations” with UK financial regulator the Prudential Regulation Authority, “there is an intention, barring any intervening event, to put Silicon Valley Bank UK Limited into insolvency from Sunday evening. We are determined to work on the behalf of our clients.”
Additional reporting by Michael O’Dwyer and Brooke Masters in New York