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 had 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 were confronted with the biggest banking failure since the financial crisis of 2008, coupled with the threat of wholesale insolvencies among high-growth tech firms.

The Government and Bank of England were scrambling frantically over the weekend to find a solution to this nightmare, on the eve of Jeremy Hunt’s Budget.

At the eleventh hour, a UK bank insolvency and taxpayer bailout – needed to prevent a wave of tech firms that had been clients of SVB from going under – were averted.

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

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

International banking titan HSBC rode to the rescue and bought up SVB’s UK loan operations for £1 early this morning.

Unfortunately that does not mean we can all breathe a sigh of relief and go back to discussing Gary Lineker and his tweets.

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

As I predicted, the sell-off of bank shares continued when markets opened today, despite HSBC’s intervention.

So what does it all mean for the man on the street?

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. But 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.

The ‘rescues’ that took place in the financial crisis – the biggest of which was Lloyds Bank’s takeover of Halifax Bank of Scotland – caused huge problems for the rescuers. It took Lloyds years to recover.

However, history probably won’t repeat itself quite like that.

While HSBC might find its pound-shop purchase is more troublesome than it hopes, SVB UK is very small in the context of its overall assets.

One crucial difference between 2008 and now 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 when interest rates rose. 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. These holdings have also lost value.

But the big UK banks are nowhere near 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.

There are, though, serious fears of contagion in the US where shares in another lender, First Republic Bank, fell heavily in pre-market trading today.

A New York-based bank, Signature, was closed by state regulators over the weekend and a small US bank specialising in cryptocurrency, Silvergate, went into liquidation last week.

The Bank of England is stressing that UK lenders are strong and have plenty of capital – but it is never wise to be complacent about the stability of the banking sector.

Rising interest rates, the trigger for the collapse of SVB, are behind other worrying episodes including the pensions meltdown after the ill-fated Liz Truss Budget.

The fear is there are more of these unexploded bombs waiting to go off.

These events have also shone a light on the wider risks to the UK’s fast-growing tech businesses.

Many are loss-making and can experience difficulty in raising finance from conventional sources, hence their reliance on SVB.

Rising interest rates make investment in tech less attractive. When rates are low, investors are more willing to back a high-risk tech firm in the hope of higher returns – but when rates go up, the appeal is diminished.

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

Some high-growth firms have been left high and dry by SVB’s insolvency. Many entrepreneurs had millions of pounds trapped in the bank that they need to pay salaries and creditors. The hope is that the HSBC rescue will mean a smooth transition and return to business as usual.

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. The Chancellor has pinned his hopes on them.

The last thing he wanted is for a wave of potential future powerhouses to be dragged under by SVB in the week he presents his Budget.

Maybe we are not looking at a rerun of 2008, but these events show that the banking sector and the UK’s burgeoning tech industry are far from rock solid. 

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