UK government seeks to tap Middle East money to buy out Silicon Valley Bank unit

The UK government is trying to push through a takeover of the British arm of Silicon Valley Bank to prevent damage spreading across the technology sector, with a deep-pocketed Middle Eastern buyer having expressed interest.

The collapse of SVB has sparked crisis talks in Downing Street over the weekend, as British tech company executives have lobbied the government to mitigate the damage that would be caused if they lose access to their accounts at the lender on Monday.

The Bank of England announced late on Friday that it planned to use its bank insolvency procedure to resolve Silicon Valley Bank UK, which is a legally separate company to the California-based lender that was closed by US regulators the same day.

This means that two different buyers could pick up the US and UK arms separately, although potential bidders may wish to acquire both banking units.

Several people familiar with the UK process said that a Middle Eastern buyer was one of the leading bidders, in a move reminiscent of rescues after the 2008 financial crisis, while British challenger banks have also tabled bids.

One of the people described the “lead white knight” as a United Arab Emirates-based company as of last night. Rothschild is leading the process to find a potential buyer for the British entity. Rothschild declined to comment.

The UAE’s leading state funds, the Abu Dhabi Investment Authority and Mubadala, are not involved in the process, said people briefed on the matter. Adia and Mubadala declined to comment.

Other active investors in the oil-rich emirate, such as state holding company ADQ and listed conglomerate IHC, which are both chaired by the UAE’s increasingly influential national security adviser Sheikh Tahnoon bin Zayed al-Nahyan, declined to comment. Sheikh Tahnoon was also appointed as the new chair of Adia last week.

Bloomberg reported that Sheikh Tahnoon was considering a takeover through one of his investment vehicles.

British banks OakNorth and the Bank of London have also submitted bids, with the latter leading a consortium that includes private equity groups, according to people familiar with the matter. Sky News earlier reported their interest.

JPMorgan and HSBC have been asked in the past few hours to study potential bids for SVB UK, according to people familiar with the matter. JPMorgan and HSBC declined to comment.

The UK government is trying to find a buyer to step in before Monday morning or it will have to put the lender into an insolvency process. Financial advisory firm Interpath has been lined up to oversee a potential insolvency, according to people familiar with the process.

SVB UK had nearly £7bn in deposits when the BoE deemed it insolvent on Friday, according to one of the people, in a sign of just how quickly the recently established British unit of the failed technology-focused US lender had grown.

The Financial Times reported on Friday that SVB UK had applied to draw £1.8bn under the BoE’s discount window, which offers short-term funding to banks, hours before it collapsed as the exodus of deposits grew.

The person added that the British unit of the lender had lost billions of pounds in deposits ahead of the move to put it into insolvency.

The UK’s Prudential Regulation Authority declined to comment on these figures. SVB UK declined to comment.

The details offer the first glimpse into the scale of the failed lender’s footprint in the UK, as the British unit had been operating independently for less than a year and is yet to file accounts that reflect its full balance sheet.

While SVB gained a UK banking licence in 2012, in August 2022 its British unit became an independent subsidiary with its own balance sheet and regulatory authorisations. SVB UK is a subsidiary of Silicon Valley Financial Group, the listed parent company of the US banking unit that was taken over by regulators.

SVB UK’s latest published accounts cover the year ending December 31 2021, the year before it gained its independent regulatory authorisations. The financial statements — which were signed off in June 2022 — reveal that the UK unit gained a £10mn capital injection from Silicon Valley Financial Group in May 2022.

Reporting by Robert Smith, Stephen Morris, Laura Noonan, Daniel Thomas, Arash Massoudi, Simeon Kerr, Emma Dunkley and Kate Beioley