LONDON, March 11 (Reuters) – Britain’s finance ministry and the Bank of England are working together to ease the disruption that could stem from the collapse of the UK branch of Silicon Valley Bank (SIVB.O), which was… have been seized by regulators, the ministry said on Saturday.
Talks were set for later on Saturday to discuss issues affected by the collapse of British tech companies, the ministry said in a statement.
“The government recognizes that companies in the tech sector are often not cash-flow-positive as they grow, and they rely on cash on deposits to cover their day-to-day costs,” the statement said.
The UK banking system remains strong and resilient, the ministry said, adding that the issues affecting the Silicon Valley bank were specific to it and did not have implications for other banks operating in the UK.
see two more stories
More than 250 UK tech firm CEOs signed a letter addressed to Jeremy Hunt, the British Chancellor of the Exchequer (minister of finance), calling for the government’s intervention, a copy seen by Reuters shows.
“The recent news of SVB’s insolvency represents a potential threat to the UK’s tech sector,” the letter said. “This weekend most of us as Tech Founders are running the numbers to see if we are potentially technically bankrupt.”
“Most businesses in the current economy are operating on very good margins and the contagion from early bankruptcies will be widespread and affect the economy far beyond the tech sector,” the letter said.
Sky News reported earlier on Saturday that Bank of London, a British clearing bank, was considering a rescue bid for SVB’s UK branch.
The Bank of England said on Friday it was seeking a court order to keep SVB UK in insolvency process after US regulators took over its parent company SVB Financial Group.
Under insolvency proceedings for banks in Britain, some depositors are eligible for compensation of up to 85,000 pounds ($102,000) for cash held with lenders, or 170,000 pounds for joint accounts.
The UK’s Department for Science, Innovation and Technology is also talking to affected tech firms. Further statement will be issued after the talks on Saturday.
Susannah Streeter, head of money and markets at investment firm Hargreaves Lansdowne, said in an emailed note that there will be aftershocks in the tech sector next week.
“There will be immediate talks about possible takeovers, with regulators under pressure to negotiate bailouts to avoid further damaging repercussions,” Streeter said.
Reporting by Sarah Young and Elizabeth Howcroft; Editing by Tomasz Janowski and David Holmes
Our Standards: The Thomson Reuters Trust Principles.