The UK arm of Silicon Valley Bank (SVB UK) is set to be declared insolvent by the Bank of England (BoE) after its US parent company collapsed on Friday.
The BoE stepped in after SVB UK applied for £1.8bn in short-term emergency funding via its discount window facility, reported the FT.
The move came just hours after SVB UK CEO Erin Platts appeared on a Zoom call with hundreds of UK founders and investors to reassure them that the UK bank was still operating and that its deposits were separate from those of the US parent company.
What happens to startups' money?
The BoE's bank insolvency procedure will aim to pay out eligible depositors up to £85,000 (the amount of funds protected by the Financial Services Compensation Scheme in each UK bank account) as soon as possible.
"In the interim, the firm will stop making payments or accepting deposits," says a statement from the BoE.
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The domino effect
Founders moved en masse to move money from SVB on Friday as confusion mounted as to whether funds deposited in UK SVB accounts would be protected regardless of what went on in the US.
SVB UK finally released a statement at 3pm GMT confirming that it did indeed have a separate balance sheet from its US parent bank but by then, it seems like much of the damage had already been done.
VCs also began shifting money away from SVB — and asking their LPs not to send funds to their SVB accounts.
Many investors also sent emails to their portfolio companies advising them to diversify where they held their capital. The VCs that didn't advise against moving money swiftly became the odd ones out.