Startup lender Silicon Valley Bank (SVB) in California has been closed by regulators after a liquidity crisis triggered panic withdrawals, resulting in the largest bank failure since the 2008 financial crisis. The collapse has sent shockwaves among UK startups, many of which have accounts with SVB’s UK subsidiary.
However, SVB UK has confirmed that it is still processing payments and funding loans for its UK clients. It has reassured its clients that it is a “standalone independent UK regulated bank,” with funds “ringfenced” from its US parent company and other subsidiaries.
Despite this, UK startups have begun withdrawing at least some of their funds from SVB UK, causing “mass panic” in startup circles, according to deep tech investor and general partner at Silicon Roundabout Ventures, Francesco Perticarari. He advises startups to be cautious and ensure they have diversified with one to two months’ runway in a separate account.
The crisis at SVB led US investors to advise startups to withdraw funds from the bank, causing a run on the bank after it was unable to meet all withdrawal requests. SVB has previously said it provides accounts for half of US startups.
On Friday evening, the US Federal Deposit Insurance Corporation (FDIC) took charge of deposits at SVB after the Nasdaq-listed US parent company lost over 60% of its share value due to the announcement of selling almost $2bn worth of stock to cover losses caused by a sell-off of its bond portfolio.
The crisis has impacted the banking world, with Barclays, Lloyds, and HSBC all facing share price drops in the 3-5% range. SVB was founded in 1983 and has been in the UK market since 2004, creating a London-headquartered subsidiary to reflect its major UK presence. It has since amassed a UK portfolio of 51 firms, including well-known startups such as Wise, Paddle, Wagestream, and Plum.
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