Britain’s digital banks will need support over the next few weeks and months to help them cope with the market fallout from the collapse of Silicon Valley Bank, a trade body representing UK fintechs said on Friday.
Investor confidence in the global banking sector has been shaken in recent weeks by the demise of Silicon Valley Bank, the collapse of a large U.S. regional lender and the emergency rescue of Swiss giant Credit Suisse.
Silicon Valley Bank’s UK arm, which had focused on tech start-ups, was bought by HSBC in a deal facilitated by the UK government and the Bank of England after more than 250 UK tech executives warned that its failure would pose an “existential threat” to their sector.
Industry, government and regulatory bodies must now work together to protect customers and businesses amid “a concern that there may well be more disruption coming our way from across the finance ecosystem,” Janine Hirt, CEO of trade body Innovate Finance, said in a statement sent to Reuters.
“Neobanks are not immune to the current market conditions, and it is important that steps are taken to ensure they have the support over the course of the coming weeks and months,” she said. A neobank, or digital bank, is a bank whose services are accessed via an app or website as opposed to having physical branches.
Hirt did not elaborate on the type of support needed.
The CEO of hedge fund Man Group (EMG.L) told a conference in London last week that the banking turmoil sparked by the collapse of Silicon Valley Bank is not yet over, and he believed a significant number of banks will fail within two years. He said that challenger banks – lenders which are usually smaller and newer than the big high-street banks – in Britain could be at risk.
Hirt said that Innovate Finance has been offering “close support” to challenger banks to help them navigate the “turbulence” in the sector.
The Bank of England and the British government have said that the country’s banking system is well capitalised and funded.
BoE governor Andrew Bailey told lawmakers this week that the central bank was on alert amid the global turmoil, but added that Britain was not experiencing stress linked to the demise of Silicon Valley Bank.