Fears grow for challenger banks as backers are hit 

Some of the UK’s leading tech companies took a beating yesterday as their lenders felt the pain of the collapse of Silicon Valley Bank (SVB).

Molten Ventures, a FTSE 250 investment company whose portfolio includes banking app Revolut – founded by Nikolay Storonsky – saw its shares fall 3.8 percent, or 12 pence, to 303.6 pence after a sharp drop on Friday when the crisis first started.

Another of Molten’s investments is customer review website Trustpilot, which revealed that SVB was its ‘main banking partner’ and that it had around £20 million in cash at the bank’s UK subsidiary.

The falls have raised new questions about how these companies are funded. Fellow tech investor Chrysalis Investments fell 2.5 percent, or 1.5 pence, to 59.2 pence on fears of market contagion.

The company’s portfolio includes money transfer group Wise, which itself fell 11.4 percent, or 66 pence, to 515 pence, as well as challenger bank Starling and buy-now-pay-later group Klarna.

Another Chrysalis investment, Secret Escapes, also invested with SVB.

Meanwhile, asset manager Columbia Threadneedle was hit as its £1.5bn Responsible Global Equity fund held around 97,000 shares in SVB, while its larger £4.8bn F&C investment fund held around 46,000. The latter’s shares fell 1.8 percent, or 17 pence, to 917 pence in London.

Will Marwick, chief executive of payments firm IFX, said the collapse of the SVB and the market turmoil it unleashed would draw “renewed attention” to the stability of the financial technology sector.

“The number of fintechs exposed to SVB highlights the need for clients to regularly review how diversified their operations are across different banking partners through their provider and to ensure robust systems and risk controls are in place,” he added.

Meanwhile, John Colley, associate dean of Warwick Business School, said the fall of SVB would be “a concern” for the industry and that banks serving tech start-ups would likely be “a concern for depositors.”

He added that while the UK and US governments had helped bail out SVB, they could “draw the line there” and put other banks in niche sectors at risk.

“So far, banks have escaped a run, but they may not stay that way for long,” Colley said.

SVB’s collapse sent shockwaves through the global financial system as investors panicked that the crisis that brought down the California-based company could spread.

SVB had invested heavily in US Treasury bonds which, while mostly safe investments, saw their value fall as interest rates rose, forcing the company to try to raise funds and raising concerns about the stability of the company and that of other banks .

Officials on both sides of the Atlantic moved quickly to contain the crisis, with US regulators taking control of SVB on Friday following the collapse, the largest US bank failure since the 2008 financial crisis.