UK finance minister and Bank of England work to contain SVB fallout

LONDON (Reuters] -The Bank of England and Britain’s finance ministry are working together to minimise disruptions that could result from the collapse of Silicon Valley Bank’s UK arm, according to the ministry on Saturday.

The ministry stated in a statement that talks were planned for Saturday to address the problems faced by British tech companies who have been affected by the crash. Friday’s statement by the ministry stated that the Bank of England was seeking a court order for SVB UK to be placed insolvency proceedings.

“The government recognises that tech sector companies are often not cashflow-positive as they grow, and that they rely on cash on deposits to cover their day to day costs,” The statement was as follows:

Two people familiar with the discussions revealed that Rothschild & Co, an advisor firm, is considering options for SVB UK to avoid insolvency.

A letter was signed by more than 250 chief executives of UK tech firms, addressed to Jeremy Hunt (finance minister) and calling for intervention from the government.

“The recent news about SVB going into insolvency represents an existential threat to the UK tech sector,” The letter stated. “This weekend the majority of us as tech founders are running numbers to see if we are potentially technically insolvent.”

“Most businesses are operating on very fine margins in the current economy and the contagion from the initial insolvencies will be vast and impact the economy far beyond the tech sector,” The letter stated.

Sky News reported that earlier in the day, the Bank of London had made a British clearing banking bank aware of the possibility of a rescue bid for SVB UK.

Bank insolvency proceedings in Britain allow some depositors to receive up to 85,000 pounds ($102,000), or 170,000 for joint accounts, as compensation for cash held by lenders.

Britain’s Department for Science, Innovation and Technology has also reached out to the affected tech companies. After Saturday’s talks, a further statement will follow.

Susannah Streeter (head of money and markets, Hargreaves Lansdown) stated in an email that there would be aftershocks next week in the tech sector.

“Urgent talks regarding potential takeovers will be ongoing, with regulators under pressure to negotiate bailouts to avoid further damaging fallout,” Streeter said.

The ministry stated that Britain’s banking system was strong and resilient. According to the ministry, the issues that affected Silicon Valley Bank were unique and had no impact on other banks in the UK.

(Reporting by Sarah Young & Elizabeth Howcroft; Additional Reporting by Amy-Jo Crowley, Pablo Mayo et Elisa Martinuzzi; Editing done by Tomasz Jaowski, David Holmes & Grant McCool