Key takeaways
- The collapse of Silicon Valley Bank (SVB) marks the largest banking collapse since the 2008 financial crisis.
- The UK tech sector faces questions about future financing following the loss of a key banking service provider.
- The collapse of SVB in the UK has raised concerns about the government’s Science and Technology Framework and its ability to support the country’s tech sector.
- Banking regulation changes, particularly in ring-fencing requirements, are now under scrutiny as a result of SVB’s collapse.
Issue 1: Financing the UK’s Science and Technology Framework
- Questions over how the government will finance its ambitious plan to make the UK a global science and technology superpower by 2030.
- The need to better utilize the UK’s domestic financial services sector in supporting tech firm growth.
Issue 2: Future of Banking Regulation in the UK
- Calls to reevaluate proposed changes to ring-fencing regulations for UK banks.
- Balancing consumer risk with international competitiveness in financial services.
Introduction
The collapse of Silicon Valley Bank (SVB) on 10 March 2023 is the largest banking collapse since the 2008 financial crisis. The UK subsidiary, which focused on early-stage technology startups, raises important questions regarding banking regulation and the future financing of the UK tech sector.
The Fall of SVB
The US Federal Reserve, alongside central banks in the UK and EU, began raising interest rates at the start of 2022. This led to reduced government bond values and a loss of confidence in the tech sector. As a result, SVB customers began withdrawing their deposits, leading to the bank’s collapse.
Implications for the UK Tech Sector
SVB’s collapse raises questions about how the UK government will finance its Science and Technology Framework, which aims to make the UK a global science and technology superpower by 2030. The collapse also highlights the importance of deep networks between bankers, venture capitalists, and tech entrepreneurs in supporting the tech sector.
Banking Regulation in the UK
As part of the post-Brexit Edinburgh Reforms, the UK government planned to consult on changing the ring-fencing regulations for UK banks. SVB’s collapse has raised questions about the safety of such changes, as higher interest rates may make alterations to ring-fencing requirements riskier for customers.
