“Project Yeti”: Inside the scramble to save Silicon Valley Bank UK

“It’s going down to the wire.” 

That was the view of Coadec CEO Dom Hallas at 11pm on Sunday evening after hours of meetings had failed to produce a deal on the future of Silicon Valley Bank – with the tech industry warning it would be an existential threat to thousands of firms across the sector if nothing was in place by Monday morning. 

Four hours later, discussions between the Bank of England, Treasury officials and HSBC reached an advanced stage – with the Canary Wharf bank the preferred bidder, despite only registering an interest with the Treasury on Sunday morning. 

More than 40 listed firms had lined up announcements revealing the scale of their exposure to the collapsed lender on the London Stock Exchange on Monday morning, with no knowledge yet of whether a safety net would appear.

And it would take until 6am on Monday to finalise the deal, just an hour before HSBC publicly confirmed their purchase of the UK arm to the stock market – giving tech bosses the chance to breathe a sigh of relief after a weekend of catastrophe planning. 

The accord marked the end of a weekend of meetings between tech industry executives, Bank of England and Treasury officials – with the bank’s future still very much in the balance well into the early hours of Monday morning. 

Alarm bells ringing 

Concerns spread on Thursday last week as top VCs in the US began advising clients to pull their cash from the bank, sending fears of a full-scale bank run rippling across the Atlantic. 

By Friday morning, the sudden demise of SVB in the USA was already the subject of discussion at Downing Street, where a host of tech leaders were already meeting as part of efforts to retain and attract more high-growth firms to the UK.

At around 2:50pm on Friday, the boss of SVB’s UK arm Erin Platt circulated an email to customers and media reassuring that the UK bank was a “standalone entity with its own balance sheet and governance structure.” Just hours later, any trace of that statement had been wiped from the firm’s website and social media channels.

The Bank of England statement, frankly, was unhelpful and worrying

Senior tech industry figures had begun making increasingly impassioned pleas to regulators to step in and steady the ship throughout Friday evening, acutely aware of the potential devastation that a collapse would wreak across the UK’s start-ups. As one put it: “Friday was when shit got real.”

By midnight, the Bank had announced it was planning to put the bank into insolvency by Sunday evening – effectively giving the Treasury the weekend to avoid chaos in the capital’s tech ecosystem.

Intended to settle nerves, however, the Bank’s statement had the opposite effect. 

“The Bank of England statement, frankly, was unhelpful and worrying,” a tech boss close to the discussions tells Morning Wire 

“You have the situation where the Bank of England statement was essentially saying ‘we’re going to let the bank die and it wasn’t a systemic risk’, but then obviously, we could see the risk that it had in the ecosystem.”

The morning after, phone calls began between the Bank and Treasury at the highest level.

As more concerns began to emerge on LinkedIn and Twitter, Treasury officials began to scout out information from the tech community on the money they held with SVB UK and their cash flow. SVB UK’s clients are different from most banks; they tended to keep large chunks of money in their accounts, with much of it uninsured.

Senior tech figures including Hallas; the chair of the Centre for Finance, Innovation and Technology Charlotte Crosswell and Tech Nation chief Gerard Grech began rallying a grassroots campaign from tech founders towards the Treasury – which had internally codenamed the effort to find a future for Silicon Valley Bank UK ‘Project Yeti.’

Within hours, officials had received 500 emails from worried founders – intelligence that gave civil servants the chance to grapple with the scale of the problem. 

Late night phone calls

As many turned to their TV screens to watch England’s humiliation at the hands of France in the Six Nations, meetings were still ongoing in the Treasury as potential buyers began to make themselves known. 

As France ran in try after try, expressions of interest began to come in from the Bank of London, Oaknorth and an Abu Dhabi investment fund, ADQ. Although reports emerged that Barclays was in the mix too, Treasury sources suggest they were never heavily involved in conversations.

The severity of the situation became clear in a roundtable chaired by City minister Andrew Griffith at 5pm.

At this point a preferred option began to merge: the Chancellor telling officials to prioritise a sale process, with mechanisms to protect deposit holders developed as a just-in-case, effectively ruling out the possibility of a traditional bailout or rescue. At 9pm that evening Hunt brought Rishi Sunak, Andrew Bailey and the boss of the Prudential Regulation Authority up to date on proceedings. 

With a sale process the favoured option, Sunday morning began well – HSBC expressing an interest, having initially had some early conversations on Saturday. Between a host of media interviews ahead of the budget on Wednesday, Jeremy Hunt began speaking to those interested in buying the bank. 

At 2pm, the Prime Minister – en route to San Diego for a meeting with US President Joe Biden and Aussie PM Anthony Albanese – was updated mid-air. Meetings continued throughout the day, with the finance-savvy Prime Minister again dialled in later that evening. 

HSBC’s bid became public knowledge around 6pm, with Sky News’ Mark Kleinman tweeting that the bank was interested. Around the same time, the Bank of London went public with the news it had made a formal bid, although scepticism at the clearing bank’s ability to pull off the transaction was widespread in the tech community. Morning Wire understands that by contrast HSBC’s balance sheet and the bank’s energy and enthusiasm to get the deal done became increasingly appealing to those involved.

As the hours ticked by, HSBC’s bid received ever more attention, with a so-called bridge bank option and liquidity support from the British Business Bank in reserve. 

They wouldn’t be needed – with the Chancellor and officials burning the midnight oil, HSBC emerged as the ‘white knight,’ with all sides pointing in the same direction as of Sunday evening. That wasn’t the end of the phone calls – displaying extraordinary stamina, Griffith and Bailey were on the phone as late – or as early – as 4am.

The announcement steadied the nerves of a tech community which had been on a knife-edge all weekend; so much so that founders sent a ‘thank you’ letter to the Chancellor earlier today.

“Thank you to you and your team for understanding the urgency, for appreciating the risk to the UK tech sector and its importance to the UK economy and for working around the clock to find a timely solution,” it read.