Try to secure UK takeover of Silicon Valley Bank amid fears of hit to tech firms

A number of potential buyers are circling failed lender Silicon Valley Bank UK.

Chancellor Jeremy Hunt said the government was “working at pace” on a plan to prevent the collapse of affected businesses, which could include an emergency private takeover deal.

A survey of 31 venture capital funds, which hold thousands of investments in UK technology and science companies, found that 34% of their portfolio companies – out of 336 – have bank accounts.

More than 200 of them now face short- or long-term cash flow risk, according to figures from the BVCA – the industry body that represents venture capital investors.

Around £2.5 billion of funds from these companies are locked up in the lender.

Many other businesses fear they will be affected with the Times reporting that more than 3,000 companies have around £7bn in deposits in the UK subsidiary.

The parent company of California-based Silicon Valley Bank collapsed and had its assets seized by US regulators on Friday – the biggest bank failure since the 2008 financial crisis.

The Bank of England then ordered its UK subsidiary into bankruptcy from Sunday evening.

Banking giants HSBC and JP Morgan were among several parties exploring buying the bank’s British operations, Sky News reported. Both declined to comment.

Oaknorth Bank, a business lender founded by former Tory donor Rishi Khosla, was also in takeover talks, the PA news agency understands.

We cannot let the UK start-up community pay the price for this banking failure, because then the UK economy will ultimately pay the price

Shadow Chancellor Rachel Reeves

There has also been interest from the Bank of London and Abu Dhabi’s sovereign wealth fund ADQ, according to Sky.

Discussions were understood to have continued into the evening as officials tried to find a buyer before the insolvency deadline.

Mr Hunt warned that the technology and science sectors were at “serious risk”, but said there was no risk to the UK financial system as a whole.

He said the government and the Bank of England were also looking at ways to extend a temporary cash bailout to companies hit by the collapse of the bank, a lender to “some of our most promising and exciting businesses”.

Speaking on political shows on Sunday morning, he said: “The Prime Minister and I and the Governor of the Bank of England are absolutely determined to do everything we can to protect the future of these very, very important companies.

“We want to find a way that minimizes or, if we can, avoids all losses in these incredibly promising companies.

“What we’re going to do is very quickly come up with a plan to make sure they can meet their operating cash flow requirements.”

The chancellor declined to say whether the government would guarantee 100% of the companies’ deposits.

Only £85,000 of individual customer deposits will be protected through the UK’s deposit insurance scheme, meaning many faced big losses without government intervention.

Shadow chancellor Rachel Reeves stressed the urgency of the situation, noting that when the markets open on Monday, many companies will not know whether they can pay staff or suppliers.

He said: “We need tomorrow morning to hear from the Government how they are going to protect them. Whether this is guaranteed, or working with the US government to bail out Silicon Valley Bank, there are different answers to this problem.

“We cannot let the UK start-up community pay the price for this bank failure, because it will be the UK economy that will ultimately pay the price.

“I would urge the government to do more than offer warm words, but present concrete plans.”

Prime Minister Rishi Sunak, speaking to reporters accompanying him to the US, said the government recognizes the “concern and concerns that the bank’s customers have” and “makes sure we can work to find a solution that ensures operational liquidity and people’s cash flow needs. “.

He reiterated that there is no “systemic risk of contagion” as he declined to “engage in speculation” when pressed about whether an emergency program to cover the deposits was being considered.

The prime minister, who was briefed by the chancellor on the situation throughout his flight to San Diego, backed the Governor of the Bank of England, saying “yes” when asked if Andrew Bailey was overseeing a strong regulatory environment for UK banks.

Representatives of the technology industry were invited to an emergency round table with the Minister of Finance Andrew Griffith on Saturday.

BVCA chief executive Michael Moore said: “The immediate implications for the technology and wider private capital ecosystem are far-reaching. It’s a lot of highly skilled jobs.”

Silicon Valley Bank came under US government control on Friday after a capital and banking crisis.

US Treasury Secretary Janet Yellen said she was working with regulators to protect US depositors, but ruled out a big bailout.

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