After U.S. regulators closed Silicon Valley Bank (SVB) on Friday, the Bank of England has closed its UK-based subsidiary. The central bank explained that it intends to place the subsidiary under bank insolvency proceedings.
BOE closes UK branch in wake of SVB collapse
After Silicon Valley Bank (SVB) was closed by the Federal Deposit Insurance Corporation (FDIC) and the California Department of Financial Protection and Innovation (DFPI), the ripples of the failure of the 16th largest bank in the US are beginning to unravel. California’s DFPIexplainedthat SVB’s disruption began on Wednesday, with customers attempting to withdraw $42 billion in deposits via wire transfer by Thursday.
SVB’s failures have now moved offshore, affecting the company’s U.K. subsidiary, leading the Bank of England to intervene and force it to close. On Saturday, SVB U.K.’s official Twitter pageretweeted a joint statementfrom various British venture capital funds supporting the U.K. branch.
Bank of England (BOE)saidSilicon Valley’s UK branch will stop processing payments and will no longer accept deposits. The BOE statement said, “The Bank of England intends to apply to the court to place Silicon Valley Bank U.K. Ltd. into bank insolvency proceedings unless there is meaningful additional information.” Bank insolvency proceedings mean that eligible depositors will be paid as soon as possible by the FSCS up to the protection limit of £85,000, or £170,000 in the case of joint accounts.”
In a note sent to Bitcoin.com News, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said SVB’s UK division is bound to fail.
“With SVB’s credibility so badly damaged, it seemed inevitable that the UK subsidiary would also be forced into bankruptcy. The failure of the U.S. bank scared away customers of the bank, despite claims that the U.K. subsidiary was separate from its parent company.” When U.S. regulators ground down the parent company, attempts to withdraw deposits escalated, putting the bank in a very precarious position,” the market analyst added.
In a BOE statement on Friday, Silicon Valley’s U.K. branch noted that its other assets and liabilities would be dealt with by liquidators, with any recoveries to be distributed to creditors. The BOE statement emphasized that “Silicon Valley Bank U.K. has little presence in the U.K. and no significant function in supporting the financial system. “Analysts at Hargreaves Lansdown explained that central bank rate hikes may be more carefully scrutinized before other financial failures follow the collapse of SVB He explains.
“It is clear that the sharp rise in interest rates has taken the sector by surprise, and the Fed’s decision to continue raising rates has brought
