LONDON — The collapse of Silicon Valley Financial institution was the results of a disaster in banking moderately than expertise, in response to a high enterprise capitalist.
Anne Glover, CEO and co-founder of Amadeus Capital, mentioned Friday that the SVB disaster was attributable to “completely irresponsible” practices by Silicon Valley Financial institution and its administration — particularly, taking short-term deposits from VCs and investing them in long-maturity debt.
“It’s a banking one-on-one failure, unbelievably irresponsible frankly by the senior administration 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 a vital pillar of the tech business, providing financing for companies typically turned away by the standard banks.
“They took money deposits from VCs and hedge funds and put them into first-year mortgage bonds that fell in worth when the rates of interest went up,” Glover added.
“They did not hedge the rate of interest. That is actually fundamental banking, it is nothing to do with the tech neighborhood. The tech neighborhood was impacted.”
Throughout the Atlantic, SVB’s U.Ok. arm was bought to British financial institution HSBC for £1, in a authorities and Financial institution of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits.
Glover, who serves on the Financial institution of England’s board as a non-executive director, mentioned the central financial institution “did an exceptional job in delivering a decision that was passable to the U.Ok., significantly better than the U.S. did.”
Banks extra broadly have been beneath immense pressure attributable to an increase in rates of interest, which has made debt dearer. Whereas 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 turn into much less precious.
Credit score Suisse is probably the most notable failure within the sector up to now. The Swiss banking big 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 working Apax Ventures. She co-founded Amadeus in 1997 with Hermann Hauser, who was instrumental within the improvement of the primary Arm processor.