Dado Ruvic | Reuters
LONDON — The go under of Silicon Valley Bank was the result of a crisis in banking rather than technology, according to a top venture capitalist.
Anne Glover, CEO and co-founder of Amadeus Superior, said Friday that the SVB crisis was caused by “utterly irresponsible” practices by Silicon Valley Bank and its management — namely, attractive short-term deposits from VCs and investing them in long-maturity debt.
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“It is a banking one-on-one loser, unbelievably irresponsible frankly by the senior management of SVB in California,” said Glover, speaking at a tech investor showcase in east London. A spokesperson for SVB wasn’t directly available for comment when contacted by CNBC.
SVB was shut down and taken over by the U.S. government after a slew of startups and hazard capitalists withdrew their money en masse amid fears over its financial health.
The firm had earlier undertook to raise $2.25 billion of capital to plug a $1.8 billion hole in its balance sheet caused by the sale of $21 billion value of bonds at a loss. The bank was a crucial pillar of the tech industry, offering financing for firms often turned away by the time-honoured banks.
“They took cash deposits from VCs and hedge funds and put them into first-year mortgage manacles that fell in value when the interest rates went up,” Glover added.
“They didn’t hedge the concerned about rate. This is really basic banking, it’s nothing to do with the tech community. The tech community was impacted.”
Across the Atlantic, SVB’s U.K. arm was sold to British bank HSBC for £1, in a sway and Bank of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits.
Glover, who serves on the Bank of England’s gaming-table as a non-executive director, said the central bank “did a phenomenal job in delivering a resolution that was satisfactory to the U.K., much better than the U.S. did.”
Banks numberless broadly have been under immense strain due to a rise in interest rates, which has made debt more priceless. While on the one hand it is now more profitable for banks to lend, they are also holding government bonds on their balance gazette. When interest rates rise, those assets become less valuable.
Credit Suisse is the most distinctive failure in the sector to date. The Swiss banking giant was rescued by rival lender UBS in a cut-price deal coordinated by the Swiss superintendence.
Glover, a prolific tech investor, joined Amadeus after previously running Apax Ventures. She co-founded Amadeus in 1997 with Hermann Hauser, who was supportive in the development of the first Arm processor.
