RUTH SUNDERLAND: Silicon Valley Bank may be bad news for us all

Until this weekend, very few people in Britain would even have heard of Silicon Valley Bank (SVB), an American lender to high-tech firms in California that has an operation here in the UK.

The US bank was seized by regulators on Friday, and the Bank of England said at the weekend it planned to put the UK arm into insolvency. Suddenly, we are confronted with the biggest banking failure since the financial crisis of 2008.

The collapse of SVB sent shockwaves across world stock markets, wiping nearly £10billion off the value of the big high-street banks, NatWest, Barclays, Lloyds and HSBC.

I wouldn’t be at all surprised if there is more selling of bank shares today.

So what does it all mean for ordinary savers and bank customers?

It was announced on Friday that Californian regulators had taken over SVB (Pictured: Headquarters in California on Friday)

The events unfolding now might sound frighteningly reminiscent of the early stages of the global financial crisis of 15 years ago, which led to the downfall of the Royal Bank of Scotland, HBOS and a number of building societies.

Back then, we came within a whisker of the collapse of the entire financial system with cash machines at one point close to being shut down.

At first sight, there appear to be parallels. SVB in the UK is a small lender at the periphery of the financial system. So was Northern Rock, and a run on that former building society was one of the sparks that lit the bonfire of banking stocks in 2008.

One crucial difference, however, is that SVB in the UK has no personal customers so no one’s individual savings and current accounts are at risk.

The American parent company went under because it had put very large sums of money into US government bonds, whose value recently tanked. It was then forced into a fire sale of those bonds at a big loss.

All banks, including the big UK lenders, hold government bonds. But they are not as exposed as SVB because they have plenty of other assets on their balance sheets. New rules introduced following the credit crunch obliged large UK banks to maintain much bigger cushions of capital in case things go wrong.

It is never wise to be complacent about the stability of the banking sector but, at this stage, it looks as though there is a greater risk to the UK’s fast-growing tech businesses than the financial system.

SVB in the UK was a key part of the tech scene, backing well-known start-ups, such as pension-pot consolidator PensionBee and business review website Trustpilot.

Some firms have been left high and dry by SVB’s insolvency. Some entrepreneurs have millions of pounds trapped in the bank that they need to pay salaries and creditors.

They fear they could go under themselves without swift help from the Government.

Thousands of jobs in the sector could be at risk.

If a large number of tech firms were to go bust, it would have serious repercussions for everyone.

Tech entrepreneurs are the men and women who could bring about a new industrial revolution in the UK. Chancellor Jeremy Hunt has pinned his hopes on tech.

The last thing he wants is for a wave of potential future powerhouses to be dragged under by SVB in the week he presents his Budget. So, while we may not be looking at a rerun of 2008, the impact on the tech sector will certainly be damaging for us all.