Britain battles to limit SVB damage as potential buyer of Britain’s footsteps By Reuters

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Reuters. FILE PHOTO: Britain’s Chancellor of the Exchequer Jeremy Hunt talks to a television crew outside the BBC headquarters in London, Britain November 18, 2022. REUTERS/Henry Nicholls/File Photo

By Andrew MacAskill and Paul Mayo Closer

LONDON (Reuters) – A potential buyer of the British arm of failed U.S. lender Silicon Valley Bank (SVB) came forward on Sunday as British Prime Minister Rishi Sunak said his government was working to limit the fallout for companies from the disappearance of the bank.

The Bank of London said it had submitted a formal proposal to the UK branch of SVB, as well as sending it to authorities including the Treasury and the Bank of England.

Friday’s dramatic failure of SVB Financial Group, which focuses on tech startups, was the biggest banking meltdown in the United States since the 2008 financial crisis.

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

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

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

SoftBank-owned lender OakNorth Bank is also considering an offer to buy SVB UK Ltd, a person with knowledge of the talks told Reuters, confirming an earlier Sky News report. Abu Dhabi’s state-backed investment vehicle ADQ is also on the hunt, Sky reported.

The BoE said it was seeking a court order to place SVB’s UK arm in bankruptcy.

Meanwhile, consultancy 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 concerns of the bank’s customers”, in comments made to reporters accompanying him to the United States. He and the government were “making sure we could work to find a solution that secures people’s operational and cash flow needs,” he said.

Upon arriving in San Diego, Sunak told reporters he worked over the weekend and on his flight from London with his finance minister, the Bank of England and regulators to “find the best solution”.

Earlier, Hunt told Sky News efforts were focused on finding a “longer-term solution that minimizes, if not completely avoids, losses to some of our most promising businesses”.

“We will be presenting plans very soon to ensure people are able to meet their cash flow needs to pay their staff,” Hunt said.

The government is considering involving the British Business Bank to help SVB customers, one person said, with business cash flow needs. The BBB is government-owned but independently run, specializing in supporting start-up businesses. During the pandemic, he managed state-guaranteed loan programs.

Banks including Lloyds Banking Group (LON:) and NatWest Group have been approached to see if an emergency takeover deal can be agreed, people familiar with the matter told Reuters.

But a senior UK bank executive said a high street lender was unlikely to buy SVB UK because its credit products would not suit a traditional bank.

EXISTENTIAL THREAT

More than 250 UK tech executives signed a letter to Hunt on Saturday calling for government intervention and warning of an “existential threat” to Britain’s tech sector, according to a copy seen by Reuters.

Under insolvency proceedings for banks in Britain, some depositors are entitled to up to 85,000 pounds ($102,000) in compensation, or 170,000 pounds for joint accounts.

Customers may not be able to recover deposits in excess of these sums, which are small compared to the deposits some startups had with the bank.

Hunt reiterated comments from the BoE that overall SVB had a limited presence in Britain and did not perform essential functions for the financial system.

The pledge to find emergency support has been welcomed by tech companies and lobby groups, including start-up industry body Coadec, calling it “recognition of the scale of the challenge”.

OakNorth chief executive Rishi Khosla told Reuters earlier this month – before SVB’s implosion – that the bank could make a “nine-figure” cash acquisition given its reserves and that it was considering potentially buying another bank in Britain.

Opposition Labor finance minister Rachel Reeves urged Hunt to offer more than “warm words”, saying the government must come up with a plan before financial markets open on Monday.

Sunak said he wanted to make Britain 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.

Authorities in the United States are preparing “material action” to shore up deposits at Silicon Valley Bank (SVB) and try to stem any wider financial fallout from its sudden collapse, sources familiar with the matter told Reuters on Sunday. .

Officials worked through the weekend to assess the impact of the failure, with a particular eye on the venture capital industry and regional banks, the sources said.

Some financial industry executives and investors are increasingly worried that the bank’s collapse could have a domino effect on other U.S. regional banks if regulators don’t find a buyer to protect uninsured deposits.

($1 = 0.8314 pounds)

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