UK declared Silicon Valley Bank’s British subsidiary insolvent

The British Central Bank intervened the subsidiary of Silicon Valley Bank (STAFF /)

He bank of englandin coordination with the British Government, has requested this Saturday a court order to declare insolvent the UK subsidiary of bankrupt US bank Silicon Valley Bank (SVBUK), so that its clients can collect deposits up to the limit guaranteed by the authorities.

The central bank has reported that the declaration of insolvency will mean that the Financial Services Compensation Scheme (FSCS) will be able to pay depositors up to the protected maximum of 85,000 pounds (96,000 euros) or double for joint accounts.

SVBUK’s other assets and liabilities “will be managed by bank liquidators” and what is recovered “will be distributed to its creditors,” a statement said.

The Bank of England clarifies that the Silicon Valley Bank UK, specializing in financing emerging technology companies“has a limited presence in the UK and has no critical functions within the financial system”.

Silicon Valley Bank specialized in the technology sector
Silicon Valley Bank specialized in the technology sector (STAFF /)

On another note, The Ministry of Economy has explained that it is in close contact with the central bank to “minimize” the effect in this country of the bankruptcy of the North American bank, which ensures that it does not represent a threat to the British banking sector because it is well capitalized.

Together with the Ministry of Science, Innovation and Technology, they will speak this afternoon with representatives of the national companies affected by the fall of the entity, the statement says.

Silicon Valley, the 16th largest bank in the United States, failed after depositors, mostly tech workers and venture capital-backed companies, they will rush to withdraw their money this week as anxiety spread regarding the financial health of the bank. It is the second largest bank failure in US history.

The bank had deep ties to Silicon Valley industries and startups. Y Combinator, a startup incubator that has launched companies like Airbnb, DoorDash and Dropbox, has referred hundreds of entrepreneurs to the bank.

The California Department of Financial Protection and Innovation (DFPI) closed SVB and named the Federal Deposit Insurance Corporation (FDIC) as the depository of the funds of the bankthe federal agency reported Friday.

The DFPI “took possession of the silicone Valley bankciting inadequate liquidity and insolvency,” said the Californian agency.

The 17 branches of the bank They will reopen Monday under the control of a new entity specifically created by the FDIC to manage the institution’s operations. In the short term, clients will be able to withdraw up to $250,000. The customers with the most money in the bankwho are the vast majority, were invited to contact the FDIC.

The technology bank

An advertisement hangs on the door of the Silicon Valley Bank located in San Francisco, California, USA March 10, 2023 (REUTERS)
An advertisement hangs on the door of the Silicon Valley Bank located in San Francisco, California, USA. March 10, 2023 (REUTERS) (STAFF /)

He silicone Valley bank was a bank Californian tech specialist who did business primarily with funds that invest in unlisted companies. Little known to the public, he was the sixteenth bank American by the size of its assets.

The firm, which operated in the United States, Europe, Asia and Israel, offered financial services to start-ups, among others, from simple bank accounts to advice to capitalize.

Closely linked to technology companies, the SVB suffered from the deterioration of the sector: the sharp rise in interest rates in the United States that affects a branch that is highly dependent on financing to grow, added to the difficulties in supplying semiconductors and the weak appetite of investors for technology stocks, mark the end of the post-pandemic tech euphoria.

Panic broke out after the matrix of this bank, SVB Financial Group, announced that it would try to raise $2.25 billion in fresh funds. The group quickly sold a portfolio of 21,000 million dollars of financial titles, with an estimated loss of 1,800 million.

In this context, the bank it failed to obtain the necessary capital and was negotiating its sale to another bank before the announcement by the regulatory authorities.

(With information from EFE)

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