What Silicon Valley Bank’s collapse in the UK should tell the biggest banks
It is, as they say, rather awkward timing. On Wednesday, Chancellor Jeremy Hunt was expected to deliver a paean to the tech industry – with investment incentives aplenty and no doubt lots of promises regarding our “world-leading” sectors.
After the collapse of Silicon Valley Bank UK, though, it is more likely that the industry needs group therapy more than it does warm words. The bank has played an outsized role in the creation of what might be termed London’s innovation economy, tailoring its offering to a very specific kind of business. More than one CEO of successful firms has said that only SVB were willing to go into a banking relationship with them when they started out.
The risk management in the US side of the business, clearly, had its flaws; the absence of a chief risk officer for much of the last two years being one particularly egregious failing. It is a shame that those failings have led to SVB in the UK being dragged down along with it; it is obviously even more painful that a host of Britain’s more exciting tech firms, through no real fault of their own other than a lack of banking diversification, are in the muck as well.
The government does seem to appreciate the urgency of the situation, working all hours this weekend to give solvent, viable businesses access to their own capital. Inexplicably, one BBC headline called this a “bailout” of tech firms, when it is anything but.
Assuming, though, that SVB is bought and begins to operate again, the lesson of the weekend may be one for other large banks to heed. It is clear now that there is both the appetite and the need for more than one decent-sized provider of banking services focussed on high-risk, start-up firms. Larger high street lenders – or a boutique – would be wise to jump on the commercial opportunity, and help put some confidence back into the tech and innovation community whilst they’re at it.