LONDON — The collapse of Silicon Valley Bank was the results of a disaster in banking relatively than know-how, in line with a high enterprise capitalist.
Anne Glover, CEO and co-founder of Amadeus Capital, mentioned Friday that the SVB disaster was attributable to “utterly irresponsible” practices by Silicon Valley Bank and its administration — particularly, taking short-term deposits from VCs and investing them in long-maturity debt.
“It is a banking one-on-one failure, unbelievably irresponsible frankly by the senior management of SVB in California,” mentioned Glover, talking at a tech investor showcase in east London. A spokesperson for SVB wasn’t instantly out there for remark when contacted by CNBC.
SVB was shut down and brought over by the U.S. authorities after a slew of startups and enterprise capitalists withdrew their cash en masse amid fears over its monetary well being.
The agency had earlier tried to boost $2.25 billion of capital to plug a $1.8 billion gap in its stability sheet attributable to the sale of $21 billion value of bonds at a loss. The financial institution was an important pillar of the tech business, providing financing for corporations typically turned away by the standard banks.
“They took cash deposits from VCs and hedge funds and put them into first-year mortgage bonds that fell in value when the interest rates went up,” Glover added.
“They didn’t hedge the interest rate. This is really basic banking, it’s nothing to do with the tech community. The tech community was impacted.”
Across the Atlantic, SVB’s U.Ok. arm was offered to British financial institution HSBC for £1, in a authorities and Bank of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits.
Glover, who serves on the Bank of England’s board as a non-executive director, mentioned the central financial institution “did a phenomenal job in delivering a resolution that was satisfactory to the U.K., much better than the U.S. did.”
Banks extra broadly have been beneath immense pressure as a result of an increase in rates of interest, which has made debt costlier. While on the one hand it’s now extra worthwhile for banks to lend, they’re additionally holding authorities bonds on their stability sheet. When rates of interest rise, these property change into much less helpful.
Credit Suisse is essentially the most notable failure within the sector thus far. The Swiss banking large was rescued by rival lender UBS in a cut-price deal coordinated by the Swiss authorities.
Glover, a prolific tech investor, joined Amadeus after beforehand operating Apax Ventures. She co-founded Amadeus in 1997 with Hermann Hauser, who was instrumental within the improvement of the primary Arm processor.
Source: www.cnbc.com”