The failure of Silicon Valley Bank, the largest US bank failure since the 2008 financial crisis, has raised concerns about its potential impact on businesses worldwide. However, UK Chancellor
Rishi Sunak has sought to ease fears about the impact of the bank's collapse on Britain's financial system. Sunak stressed that there was no "systemic contagion risk" to the UK financial system despite the fears over the failure of the major US bank.
Possible buyers for the UK arm of the failed lender have emerged, including OakNorth Bank, the Royal Group, Abu Dhabi state-backed investment vehicle ADQ, Barclays, and The Bank of London, according to reports. These potential buyers are weighing a bid to buy the UK arm of Silicon Valley Bank in an effort to limit the potential hit to companies resulting from the bank's demise.
The collapse of Silicon Valley Bank has prompted fears about the impact on the UK's tech and life science sectors, which are heavily reliant on the bank. These fears have raised concerns about an "extinction event" for start-ups and have left British fintech firms feeling "very, very nervous" about their futures.
To address these concerns, Prime Minister Boris Johnson has said that the British government is working to find a solution that secures people's operational liquidity and cashflow needs. The Prime Minister, Chancellor Jeremy Hunt, and the Governor of the Bank of England, Andrew Bailey, held crisis talks until late Saturday night to discuss the potential impact on the UK's tech and life science sectors.
Meanwhile, US officials are holding their own crisis summit amid fears of a market meltdown. Elon Musk, the billionaire owner of Twitter, has also emerged as a possible saviour after posting on his social media site that he is "open" to the idea of rescuing Silicon Valley Bank.
SoftBank-owned lender OakNorth Bank is also considering a bid to buy Silicon Valley Bank UK Ltd, according to a person with knowledge of the talks. ADQ, an Abu Dhabi state-backed investment vehicle, is also looking at the bank in the UK, as is The Bank of London, a clearing bank.
Advisory firm Rothschild & Co is exploring options for the subsidiary, as insolvency looms, two people familiar with the discussions told Reuters. The Bank of England has said it is seeking a court order to place the UK arm into insolvency.
The government is weighing involving the British Business Bank to help Silicon Valley Bank's customers, according to one person familiar with the matter, to help address firms' cash needs. The BBB is government-owned but independently managed, specialising in supporting start-up firms. During the pandemic, it ran the state-backed loans programmes.
The Financial Times reported earlier that the "lead white knight" was a United Arab Emirates-based company as of last night. Barclays and Lloyds Banking Group are among parties that have been approached by the board of Silicon Valley Bank UK over the weekend to see if an emergency takeover deal can be reached. NatWest Group has also been approached, a person familiar with the matter has claimed.
In conclusion, the failure of Silicon Valley Bank has raised concerns about the impact on businesses worldwide, particularly on the UK's tech and life science sectors. However, potential buyers for the UK arm of the failed lender have emerged, and the British government is working to find a solution that secures people's operational liquidity and cashflow needs. Despite the concerns, UK Chancellor Rishi Sunak has stressed that there is no "systemic contagion risk" to Britain's financial system. Photo by Simon Dawson / No 10 Downing Street, Wikimedia commons.