Silicon Valley Bank's British tech clients withdrew £3bn in a day

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Panicked British technology companies pulled £2.9 billion from the UK subsidiary of Silicon Valley Bank in the space of a single day, far in excess of the size of withdrawals envisaged by the normal liquidity management rules, the Bank of England has revealed.

In written evidence to MPs, Andrew Bailey, the governor of the Bank of England, said the scale of withdrawals on Friday, March 10, was 30 per cent of the SVB UK's entire deposit base and it was not clear if it could continue to withstand that scale of outflow.

Bailey judged the UK operation's failure was caused by the collapse of its US parent and it could not have survived as a viable stand-alone business because of its reliance on SVB for technology and systems, including its payments infrastructure.

The UK banking system remained "well regulated and subject to robust supervision", Bailey told the Treasury select committee in a 21-page assessment of the SBV UK failure, the Credit Suisse collapse and the wider jitters over how sharply rising interest rates have hit the mark-to-market value of trillions of bonds held by banks.

The Bank oversaw the rescue of SVB UK over March 11-12 and HSBC was able to announce the purchase of the bank for £1 on the Monday morning, easing worries that its insolvency could have exposed other financial institutions to contagion risk as well as dealing a blow to the UK technology sector.

Bailey, who also criticised the US bank bailouts, described how SVB UK had £279 million in surplus capital as of the end of December and deposits at the bank at £10 billion had been stable in the days leading up to Thursday, March 9 .

Then, "On 10 March SVB UK experienced a deposit run" as news of the US parent's difficulties crossed the Atlantic. The scale of that day's outflow was "far in excess of the outflows envisaged by the liquidity coverage ratio" — the formula that determines the minimum amount in cash and liquid assets that banks are required to hold at any time.

The letter shows how SVB UK depositors were largely not covered by the UK's deposit insurance scheme. Just 4.6 per cent of the remaining £6.7 billion deposit book was covered because most deposits were above the £85,000 limit.