LONDON — The collapse of Silicon Valley Bank was the results of a crisis in banking quite than technology, based on a top enterprise capitalist.
Anne Glover, CEO and co-founder of Amadeus Capital, said Friday that the SVB crisis was brought on by “utterly irresponsible” practices by Silicon Valley Bank and its management — namely, taking short-term deposits from VCs and investing them in long-maturity debt.
“It’s a banking one-on-one failure, unbelievably irresponsible frankly by the senior management of SVB in California,” said Glover, speaking at a tech investor showcase in east London. A spokesperson for SVB declined to comment when contacted by CNBC.
SVB was shut down and brought over by the U.S. government after a slew of startups and enterprise capitalists withdrew their money en masse amid fears over its financial health.
The firm had earlier tried to boost $2.25 billion of capital to plug a $1.8 billion hole in its balance sheet brought on by the sale of $21 billion value of bonds at a loss. The bank was a vital pillar of the tech industry, offering financing for firms often turned away by the standard banks.
“They took money deposits from VCs and hedge funds and put them into first-year mortgage bonds that fell in value when the rates of interest went up,” Glover added.
“They didn’t hedge the rate of interest. This is de facto basic banking, it’s nothing to do with the tech community. The tech community was impacted.”
Across the Atlantic, SVB’s U.K. arm was sold to British bank HSBC for £1, in a government and Bank of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits.
Glover, who serves on the Bank of England’s board as a non-executive director, said the central bank “did an outstanding job in delivering a resolution that was satisfactory to the U.K., a lot better than the U.S. did.”
Banks more broadly have been under immense strain as a result of an increase in rates of interest, which has made debt costlier. While on the one hand it’s now more profitable for banks to lend, also they are holding government bonds on their balance sheet. When rates of interest rise, those assets grow to be less precious.
Credit Suisse is essentially the most notable failure within the sector up to now. The Swiss banking giant was rescued by rival lender UBS in a cut-price deal coordinated by the Swiss government.
Glover, a prolific tech investor, joined Amadeus after previously working at Apax Partners & Company Ventures on the investment team. She co-founded Amadeus in 1997 with Hermann Hauser, who was instrumental in the event of the primary Arm processor.
