British finance minister Jeremy Hunt said on Sunday he was working with Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey to “avoid or minimise damage” resulting from the chaos engulfing the UK arm of Silicon Valley Bank.
Friday’s dramatic failure of the U.S. bank SVB Financial Group SIVB.O, which focuses on tech startups, was the biggest in the U.S. since the 2008 financial crisis.
Given the importance of the bank to some customers, its collapse could have a significant impact on British technology companies, Hunt said.
“We’ve been working at pace over the weekend, through the night,” Hunt told Sky News. “We will bring forward very soon plans to make sure people are able to meet their cashflow requirements to pay their staff.”
Hunt said efforts are focused on finding a “longer-term solution that minimises, or even avoids completely, losses to some of our most promising companies.”
Advisory firm Rothschild & Co is exploring options for the UK arm, called Silicon Valley Bank UK Limited, as insolvency looms, two people familiar with the discussions told Reuters on Saturday. The BoE has said that it is seeking a court order to place the UK arm into an insolvency procedure.
Lenders including Barclays PLC BARC.L and Lloyds Banking Group LLOY.L are among parties to have been approached by the board of SVB UK over the weekend to see if an emergency takeover deal can be reached, Sky News reported on Sunday.
Bank of London, a clearing bank, is weighing whether an offer is possible, a person with knowledge of the discussions told Reuters.
SVB Group declined a Reuters request for comment while Barclays and Lloyds Banking did not immediately respond.
More than 250 UK tech firm executives signed a letter addressed to Hunt on Saturday calling for government intervention and warned of an “existential threat” to the UK tech sector, a copy seen by Reuters shows.
Under insolvency proceedings for banks in Britain, some depositors are eligible for up to 85,000 pounds ($102,000) of compensation for cash held at lenders, or 170,000 pounds for joint accounts. Customers may not be able to recover deposits in excess of those sums, which are small relative to the deposits some startups had with the bank.
Hunt reiterated comments by the BoE that overall, Silicon Valley Bank had a limited presence in Britain and did not perform functions critical to the financial system.
The pledge to find emergency support was welcomed by tech firms and lobby groups, including the startup industry body Codec, calling it “an acknowledgement of the scale of the challenge”.
The opposition Labour shadow chancellor Rachel Reeves urged Hunt to offer more than “warm words” to companies, saying the government had to come up with a plan by the time financial markets opened on Monday morning.
British Prime Minister Rishi Sunak has said he wants to turn Britain into the “next Silicon Valley”. Britain is only behind the United States and China in terms of the level of venture capital funding for the sector, according to the government.
In the U.S., the Federal Deposit Insurance Corporation (FDIC), which was appointed receiver, was trying to find another bank over the weekend that was willing to merge with Silicon Valley Bank, people familiar with the matter said on Friday, to minimise the fallout.
Some financial industry executives and investors are growing increasingly concerned that the collapse of the bank could have a domino effect on other U.S. regional banks if regulators did not find a buyer over the weekend to protect uninsured deposits.