LONDON, March 17 (Reuters) – British banks are seeing a surge in requests to exchange cash between institutions following the collapse of US tech lender Silicon Valley Bank, as fears of contagion prompt some depositors to try to figure out the safest havens for their funds.
One of the country’s largest lenders, Barclays (BARC.L), told Reuters that there had been an increase in requests to switch or open business accounts in recent days. Virgin Money (VMUK.L), Britain’s sixth-largest bank, said in a statement it had also seen “net inflows of business deposits” in recent days.
The failure of the SVB rocked global markets last week, with contagion concerns spreading to Swiss lender Credit Suisse and forcing the country’s central bank to shore up liquidity on Thursday, bringing some breathing space.
The UK government and Bank of England said the country’s banking system is safe, sound and well capitalised, while SVB’s UK arm was bailed out by Europe’s largest bank HSBC on Monday. That means SVB UK’s customer deposits are safe and their loans are backed, HSBC’s top bosses have said.
But the California bank’s collapse has drawn additional scrutiny over the safety of uninsured deposits beyond an £85,000 guarantee granted to licensed banks in the UK, particularly for companies as they are likely to have larger deposits.
Sam Franklin, CEO of recruitment platform Otta, which has around 70 full-time employees, said the crisis has impacted the way smaller startups think about their finances.
Franklin told Reuters that a number of CEOs and startup executives had started researching other banks where they could park cash alongside SVB UK this week, citing Barclays as a favorite among some.
“We are all going on this learning journey together. We’re all looking for banks with great backing, strong brands and solid track records,” he said.
The founder of banking platform Griffin, David Jarvis, said he was part of a WhatsApp group of over 200 fintech founders, dozens of whom started opening new bank accounts after the collapse of the SVB. He said people are “mainly looking at the big clearing banks.”
Russ Shaw, founder of startup industry Tech London Advocates, told Reuters he would advise startups to spread their capital across different bank accounts as a matter of course. “I suspect a lot of people learned about the risk of not doing that this weekend,” he said.
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Rapid rate hikes by the Bank of England over the past 15 months had already led to greater competition among lenders for depositors, with smaller players gaining the upper hand as they hiked interest rates on products more quickly.
But the collapse of the SVB has intensified scrutiny of all lenders’ business models, including specialists with smaller balance sheets to fall back on.
John Cronin, banking analyst at Goodbody, said deposit migration will continue to be a key focus for analysts and investors.
“While the issues the SVB has faced have been very institution-specific, they have raised general concerns about the health of banks’ balance sheets,” he said, adding that some specialists may be less exposed as they primarily rely on consumer deposits.
“Many companies will take the time to think more carefully about how they position themselves financially going forward,” said Dom Hallas, executive director at Coadec, an organization representing UK tech startups. “But I think it’s too early to tell who the winners and losers will be.”
Sources from three specialist and online lenders said they had seen inflows of business deposits in recent days but declined to be named, citing the sensitivity of the situation.
Digital banking platform Revolut saw a 5% increase in new business signups, particularly larger businesses, last week compared to previous weeks, and a “significant increase” in overnight balances, a spokesman said.
The company, which has applied for a banking license in the UK but is not yet protected by the government’s deposit insurance, said it could not provide figures for this week.
Revolut’s customers in the EU are protected by the eurozone’s €100,000 guarantee, the spokesman said.
Several UK banks focused on retail products such as consumer savings said they had seen no change in customer behavior since the collapse of the SVB, adding that the vast majority of customer balances are well below the £85,000 government guarantee and are therefore protected .
“We have had no concerns from our customers,” said a spokesman for Metro Bank. “The UK banking system remains secure and continues to function normally.”
Reporting by Iain Withers, Elizabeth Howcroft and Martin Coulter; Edited by Sinead Cruise and Jan Harvey
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