Did the collapse of Silicon Valley Bank affect US banks? British Treasury reply

London:

The British Treasury said on Saturday that the failed SVB Bank’s problems were “specific to the firm” and had no implications for other banks operating in the UK.

The UK banking system, one of the largest in the world, “remains robust and resilient”, the finance ministry said in a press release, adding that the government was meeting with representatives of the technology sector to address their concerns.

US authorities shut down California-based Silicon Valley Bank (SVB) on Friday and the US Deposit Guarantee Agency, the FDIC, took control.

The bank is expected to open with the new name on Monday.

Finance Minister Jeremy Hunt spoke to the governor of the Bank of England on Saturday morning about Silicon Valley Bank UK, the UK subsidiary of US Bank, to ensure its failure “is managed smoothly, and Any disruption is minimized”.

The statement said Treasury officials have been speaking to affected firms and held a roundtable with industry representatives on Saturday, “to discuss the situation and concerns”.

“The government recognizes that companies in the tech sector are often not cash flow positive as they grow, and they rely on cash deposits to cover their day-to-day costs,” it said.

The bank failed after its customers, mainly from the tech sector, made massive withdrawals, and after its latest attempt to raise new money proved unsuccessful.

Little known to the general public, SVB specialized in funding start-ups and has grown to become the 16th largest US bank by assets.

Its demise is not only the largest bank failure since Washington Mutual in 2008, but also the second largest retail bank failure in the US.

The Bank of England stated that it intends to pursue bankruptcy in respect of the bank’s British subsidiary.

“It seemed inevitable that even a dramatic loss of confidence in SVB would drive its UK arm into bankruptcy,” said Susannah Streeter of financial firm Hargreaves Lansdowne.

“The US bank run deterred customers from banking with the British subsidiary, despite protests that it mounted from its parent,” he said.

British television channel Sky News reported that the Bank of London, which launched just two years ago, is one of the bidders for the bank’s British branch.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)