LONDON, March 17 (Reuters) – British banks are seeing a surge in inquiries about transferring cash between institutions following the collapse of U.S. technology lender Silicon Valley Bank, as fears of contagion have some depositors scrambling to figure out the safest havens for their financial means.
One of the country’s biggest lenders, Barclays ( BARC.L ), told Reuters it had seen an increase in inquiries to switch or open business accounts in the past few days. Virgin Money ( VMUK.L ), Britain’s sixth-largest bank, said in a statement that it had also seen a “net inflow of business deposits in recent days.”
SVB’s bankruptcy roiled global markets last week, with contagion concerns spreading to Swiss lender Credit Suisse, forcing the country’s central bank to shore up liquidity on Thursday in a move that brought some relief.
The British government and the Bank of England said the country’s banking system was safe, sound and well capitalized, while SVB’s British arm was rescued by Europe’s biggest bank HSBC on Monday. This means SVB UK’s customer deposits are safe and their loans are backed, HSBC’s top bosses said.
But the collapse of the Californian bank has drawn further attention to the safety of uninsured deposits above the £85,000 guarantee given to UK-licensed banks, particularly for businesses, as they are more likely to hold larger deposits.
Sam Franklin, chief executive of recruitment platform Otta, which has around 70 full-time staff, said the crisis has affected the way smaller start-ups think about their finances.
Franklin told Reuters that a number of CEOs and start-up heads had this week begun exploring other banks to park money in in addition to SVB UK, citing Barclays as a favorite among some.
“We are all embarking on this journey of learning together. We all look for banks with great support, strong brands and solid track records,” he said.
The founder of banking platform Griffin, David Jarvis, said he was in a WhatsApp group of more than 200 fintech founders, dozens of whom had started the process of opening new bank accounts since SVB’s collapse. He said people were “mostly looking at the big clearing banks”.
Russ Shaw, founder of startup industry organization Tech London Advocates, told Reuters he would advise startups to spread their capital between different bank accounts as a matter of course. “I suspect many learned this weekend about the risk of not doing that,” he said.
SPREADING MONEY AROUND
The rapid rise in interest rates by the Bank of England over the past 15 months has already sparked more competition between lenders for depositors, with smaller players gaining the upper hand as they raise rates on products faster.
But the collapse of SVB has increased scrutiny of the business models of all lenders, including specialists with smaller balance sheets to rely on.
John Cronin, banking analyst at Goodbody, said deposit migration would continue to be a key focus for analysts and investors.
“While the issues SVB faced were very institution-specific, they raised general concerns about the health of bank balance sheets,” he said, adding that some specialists may actually be less exposed because they rely mainly on consumer deposits.
“Many companies will be taking time to think more carefully about how they will position themselves financially in the future,” said Dom Halas, chief executive of Coadec, an organization representing UK technology start-ups. “But I think it’s too early to say who the winners and losers will be.”
Sources at three specialist and online lenders said they had seen an influx of business deposits in the past few days, declining to be named, citing the sensitivity of the situation.
Digital banking platform Revolut saw a 5% increase in new sign-ups from businesses, particularly larger companies, last week compared to previous weeks, as well as a “significant increase” in overnight balances, a spokesman said.
The company, which has applied for a UK banking license but is not yet protected by the government’s deposit guarantee, said it could not share figures for this week.
Revolut’s EU customers are protected by the €100,000 eurozone guarantee, the spokesperson said.
Several UK banks focused on retail products such as consumer savings said they had seen no change in customer behavior since SVB’s collapse, adding that the majority of customer balances were well below the £85,000 government guarantee and are therefore protected.
“We have no concerns from our customers,” a Metro Bank spokesman said. “The UK banking system remains safe and continues to operate as normal.
Reporting by Ian Withers, Elizabeth Howcroft and Martin Coulter; Editing by Sinead Cruise and Jan Harvey
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