Bank of England halts Silicon Valley Bank UK branch operations
The Bank of England (BoE) has stopped the operations of Silicon Valley Bank’s United Kingdom branch (SVB U.K.), citing its limited presence and no critical functions supporting the financial system. On March 10, the BoE declared that SVB U.K. would no longer be accepting deposits or making payments and that it would be placed into a Bank Insolvency Procedure. The decision followed the closure of SVB by the California Department of Financial Protection and Innovation.
The BoE explained that a bank insolvency procedure would enable eligible depositors to receive payments up to the protected limit of £85,000 or up to £170,000 for joint accounts through the Financial Services Compensation Scheme as quickly as possible. Bank liquidators would manage the remaining assets and liabilities of SVB U.K. during its insolvency proceedings, with any recoveries distributed to its creditors.
The announcement has raised concerns among several UK venture capitalists (VCs), who have expressed their support for SVB U.K. Index Ventures and Atomico issued a joint statement on March 12 endorsing SVB U.K., describing it as a trusted and valued partner that plays a pivotal role in supporting startups in the UK. The Coalition for a Digital Economy, a UK nonprofit that campaigns for policies to support digital startups, stated on March 11 that a large number of startups and investors in the ecosystem have significant exposure to SVB U.K. and will be very concerned.
Meanwhile, a Castle Hill report published on March 11 revealed that prominent blockchain VCs have over $6 billion in assets at the now-defunct bank. This includes $2.85 billion from Andreessen Horowitz, $1.72 billion from Paradigm, and $560 million from Pantera Capital.
The closure of SVB U.K. will have significant repercussions for startups and investors who have relied on the bank for financial services. Several prominent blockchain VCs have a substantial amount of assets at the bank, and their exposure to the insolvency proceedings could have a severe impact on the blockchain ecosystem. The closure also highlights the potential risks associated with relying on banks with limited operations and no critical functions in the financial system.