Olivier Douliery | AFP | Getty Images
The Bank of England said on Friday that it was looking for a court order to position Silicon Valley Bank UK Limited into an insolvency procedure, after U.S. regulators took over its parent company, SVB Financial Group, earlier within the day.
“SVB UK has a limited presence within the UK and no critical functions supporting the economic system. Within the interim, the firm will stop making payments or accepting deposits,” the BoE said.
Under insolvency proceedings for banks in Britain, some depositors are eligible for as much as 85,000 kilos ($102,000) of compensation for lost deposits, or 170,000 kilos for joint accounts.
Other assets and liabilities could be managed by the bank’s liquidators and any funds recovered could be passed on to creditors, the BoE said.
Bank failures are rare in Britain, with only two lenders going through the BoE’s resolution procedures since 2009.
Earlier on Friday, the Financial Times reported that SVB’s British arm had sought 1.8 billion kilos of liquidity from the BoE via its discount window facility, which offers emergency funding to banks in the event that they have adequate collateral.
Silicon Valley Bank UK said earlier on Friday that it was a standalone entity with an independent board of directors, ring-fenced from the parent company and other subsidiaries.
U.S banking regulators took over the parent SVB earlier on Friday in a bid to guard depositors after the most important bank failure because the financial crisis prompted the worldwide banking sector to shed billions in market value.
The rout in SVB’s stock, which began on Thursday, has spilled over into other U.S. and European banks. U.S. banks have lost over $100 billion in stock market value and European banks shed one other $50 billion in value over the past two days, based on a Reuters calculation.
