• Thursday, July 18, 2024
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BoE follows FDIC, DFPI to shut down Silicon Valley Bank in England

Bank of England

The Bank of England (BoE) followed U.S. regulators, the Federal Deposit Insurance Corporation (FDIC), and the California Department of Financial Protection and Innovation (DFPI) to shut down the United Kingdom (UK) branch of the bankrupt Silicon Valley Bank (SVB).

The Apex bank said in a statement that it intends to place the subsidiary into bank insolvency procedures.

Since Wednesday or Thursday, after news of an imminent collapse of SVB hit the news, owing largely to an illiquidity issue, many depositors had thronged the bank to withdraw or transfer their funds away from the bank. This situation caused panic in the financial industry and forced U.S. regulators to quickly respond by shutting down the bank temporarily and transferring ownership and control to the FDIC and California DFPI.

The effect of this collapse of the 16th largest bank in the U.S. has started, with Janet Yellen, U.S. Treasury Secretary, saying that the government has no plan to bail out the bank but was “working closely with banking regulators” to help the bank. She said this on a show aired on the U.S. TV station CBS.

Read also:US regulators intervene to avoid financial crisis at Silicon Valley, California

On Saturday, SVB U.K.’s official Twitter page retweeted a joint statement from a variety of U.K. venture capital funds supporting the U.K. branch.

Just like the FDIC said on Friday, the Bank of England said that the SVB U.K. branch would stop processing payments and is no longer accepting deposits from the public.

“The Bank of England, absent any meaningful further information, intends to apply to the court to place Silicon Valley Bank U.K. Ltd. into a bank insolvency procedure,” the BOE statement reads. “A bank insolvency procedure would mean that eligible depositors are paid out by the FSCS as quickly as possible, up to the protected limit of £85,000 or up to £170,000 for joint accounts.”

The bank added that SVB assets would be liquidated and recoveries would be distributed appropriately to the bank’s creditors. The entire process would be handled by appointed liquidators.

“[Silicon Valley Bank U.K.] has a limited presence in the U.K. and no critical functions supporting the financial system,” the BOE statement added.

According to Bitcoin.com News, Susannah Streeter, the head of money and markets at Hargreaves Lansdown, said the SVB U.K. arm was bound to fail.

Streeter explained that central bank rate hikes may be scrutinized more carefully before other financial failures follow SVB’s collapse.

“It’s clear that the rapid escalation in rates has taken the sector by surprise, and the determination by the Fed to keep raising rates has brought fresh worries,” Streeter concluded. “Policymakers will now be monitoring this turn of events very closely, and now may be more likely to tread carefully with further rate rises, to ensure nothing else gets badly broken.”