December 2, 2023

LONDON — The collapse of Silicon Valley Bank is the result of a banking crisis, not a technology crisis, according to a top venture capitalist.

Anne Glover, CEO and co-founder of Amadeus Capital, said Friday that the SVB crisis was caused by Silicon Valley Bank and its management’s “completely irresponsible” practice of taking short-term deposits from venture capital firms and investing them on long-term debt.

“This is a one-for-one failure of the banking industry, and the senior management of SVB in California is frankly irresponsible,” Glover told a tech investor presentation in east London. When contacted by CNBC, SVB’s A spokesman was not immediately available for comment.

SVB was shut down and taken over by the U.S. government as a number of startups and venture capitalists withdrew heavily amid concerns about its financial health.

The company had earlier attempted to raise $2.25 billion to plug a $1.8 billion hole in its balance sheet from the sale of $21 billion worth of bonds at a loss. The bank is a key pillar of the tech industry, providing financing to companies often shut out by traditional banks.

“They take cash deposits from venture capital firms and hedge funds and put them into first-year mortgage bonds that drop in value when rates go up,” Glover added.

Investor panic sparked swift collapse of SVB, Credit Suisse, asset manager says

“They’re not hedging rates. It’s really basic banking and it has nothing to do with the tech world. The tech world suffers.”

Across the Atlantic, SVB’s UK arm is sold to the Bank of England HSBC In a deal brokered by the government and the Bank of England, 6.7 billion pounds ($8.3 billion) of deposits were protected for 1 pound.

Glover, who serves on the Bank of England’s board as a non-executive director, said the central bank “has done an excellent job of delivering a resolution that satisfies the UK, much better than the US.”

Banks more broadly are under intense pressure due to rising interest rates, making debt more expensive. On the one hand, it is now more profitable for banks to lend, but they also hold government bonds on their balance sheets. When interest rates rise, the value of these assets decreases.

Credit Suisse is the industry’s most high-profile failure to date. The Swiss banking giant was rescued by rival UBS AG in a price cut deal coordinated by the Swiss government.

Glover is a prolific tech investor who joins Amadeus after previously running Apax Ventures. She co-founded Amadeus in 1997 with Hermann Hauser, who was instrumental in the development of the first Arm processors.

How Silicon Valley Bank Failed