Bank of England terminates operations of Silicon Valley UK despite support from UK venture capital companies
It is reported that although several UK venture capital companies expressed support for the Bank of Silicon Valley UK (SVB UK), the Bank of England (BoE) announced to stop its operation and said that the bank was “limited” and did not support the “key functions” of the UK financial system. The Bank of England explained that according to the country’s Financial Services Compensation Scheme (FSCS), “eligible depositors” would be paid a “protected limit” of up to 85000 pounds (approximately US $102288) or up to 170000 pounds (approximately US $204577).
The Bank of England has closed the UK branch of the Bank of Silicon Valley
Analysis based on this information:
The recent announcement by the Bank of England (BoE) to stop the operations of the Bank of Silicon Valley UK (SVB UK) has generated mixed reactions from several UK venture capital (VC) companies that were in support of the bank. This move by the BoE is seen as a blow to the UK financial system, especially as the country’s economy is still reeling from the impact of the pandemic.
The BoE’s explanation for its decision is that the SVB UK is “limited” and does not support the “key functions” of the UK financial system. This assertion by the BoE does not sit well with some VC companies, who believe that the decision is short-sighted, as the SVB UK provides vital services to startups and high-growth companies. These companies also argue that the SVB UK has a unique perspective on the tech industry, which makes it a valuable player in the UK financial ecosystem.
The BoE’s decision also has implications for the Financial Services Compensation Scheme (FSCS), which pays out compensation to eligible depositors in the event of a bank failure. The FSCS guarantees a “protected limit” of up to £85,000 for individual depositors and up to £170,000 for joint accounts. The BoE’s decision to terminate the operations of the SVB UK means that eligible depositors may need to find alternative banks to protect their deposits.
It is important to note, however, that the BoE’s decision does not affect the operations of SVB’s US parent company, Silicon Valley Bank, which has been operating in the UK since 2012. The parent company is regulated by the Federal Reserve Bank of San Francisco and the Office of the Comptroller of the Currency in the US and is not subject to the same regulations as its UK subsidiary.
In conclusion, the termination of Silicon Valley UK’s operations by the BoE has raised concerns for the UK financial system and its growth prospects. It remains to be seen how this decision will impact the startup and high-growth sector, which has been a major catalyst for the UK economy in recent years. Nonetheless, the FSCS compensation scheme will continue to provide protection for eligible depositors, even as they may need to find alternative banks to safeguard their deposits.
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