By Andrew MacAskill
LONDON (Reuters) -Possible buyers of the UK arm of failed U.S. lender Silicon Valley Bank emerged on Sunday as Prime Minister Rishi Sunak said the British government was working to find a solution to limit the potential hit to companies resulting from the demise.
SoftBank-owned lender OakNorth Bank is weighing a bid to buy Silicon Valley Bank UK Ltd, a person with knowledge of the talks told Reuters, confirming a Sky News report. ADQ, an Abu Dhabi state-backed investment vehicle, is also looking at the bank in the UK, Sky also said late on Sunday.
Bank of London, a clearing bank, is weighing whether an offer is possible, a person with knowledge of the discussions told Reuters earlier.
Advisory firm Rothschild & Co is exploring options for the subsidiary, as insolvency looms, two people familiar with the discussions told Reuters on Saturday. The BoE has said it is seeking a court order to place the UK arm into insolvency.
Sunak said he understood “the anxiety and the concerns customers of the bank have”, in comments made to reporters flying with him to the United States. He and the government were “making sure we can work to find a solution that secures people’s operational liquidity and cash-flow needs”, he said.
Friday’s dramatic failure of SVB Financial Group, which focuses on tech startups, was the biggest bank collapse in the U.S. since the 2008 financial crisis.
The collapse could have a significant impact on British technology companies, given the importance of the lender to some customers, finance minister Jeremy Hunt said earlier on Sunday,
“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 cash-flow 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.”
The government is weighing involving the British Business Bank to help SVB’s customers, said one person, to help address firms’ cash needs. The BBB is government-owned but independently managed, specialising in supporting start-up firms. During the pandemic it ran the state-backed loans programmes.
The Financial Times reported earlier that the “lead white knight” was a United Arab Emirates-based company, as of last night, the FT said.
Lenders including Barclays and Lloyds Banking Group are among parties that 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. NatWest Group has also been approached, a person familiar with the matter told Reuters.
EXISTENTIAL THREAT
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”.
OakNorth Chief Executive Rishi Khosla told Reuters earlier this month – before SVB’s implosion – the bank could make a “nine figure” acquisition in cash given its reserves, and that it was looking at potentially buying another bank in Britain.
The opposition Labour shadow finance minister 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 open on Monday morning.
Sunak has said he wants to turn Britain into the “next Silicon Valley”. Britain is behind only 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., authorities are preparing “material action” on to shore up deposits in Silicon Valley Bank (SVB) and try to stem any broader financial fallout from its sudden collapse, sources familiar with the matter told Reuters on Sunday.
Officials worked through the weekend to assess the impact of the failure, with a particular eye on the venture capital sector and regional banks, the sources said.
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 do not find a buyer over the weekend to protect uninsured deposits.
($1 = 0.8314 pounds)
(Reporting by Andrew MacAskill and William Schomberg; Additional reporting by Elizabeth Piper, Lawrence White, Iain Withers, Baranjot Kaur and Sinead Cruise; Editing by Frank Jack Daniel and David Holmes)