In a dramatic turn of events, HSBC has rescued Silicon Valley Bank’s UK arm and prevented a crisis in Britain’s tech sector. The move comes after all-night talks led by Prime Minister Rishi Sunak and the Bank of England. With this acquisition, HSBC has ensured that Silicon Valley Bank’s UK unit will continue to operate without interruption and contribute to the growth of the UK’s tech sector. This move is expected to have a significant impact on the UK’s financial landscape and marks a major milestone in HSBC’s expansion strategy.
HSBC becomes leading bidder for SVB UK, paying a symbolic £1 for the bank. Noel Quinn, CEO of HSBC, was involved in the negotiations with Sunak, who is in the US for defence talks. Chancellor Jeremy Hunt preferred a sale of the stricken bank to avoid big government intervention for depositors’ protection. On Monday, Hunt announced on Twitter that the government and Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC, ensuring deposit protection without any need for taxpayer support.
The Bank of England (BoE) worked urgently to stabilize Silicon Valley Bank UK (SVB UK) after the collapse of its parent, California-based SVB. The BoE took action to ensure the continuity of banking services, minimize disruption to the UK technology sector, and support confidence in the financial system. This move came after the UK government facilitated a private sale of SVB UK to HSBC for £1, in order to avoid a big intervention to protect depositors. The collapse of Silicon Valley Bank is the largest US bank failure since 2008, and hours after its collapse, US regulators closed another bank, Signature Bank. However, the BoE assured the public that no other UK banks are directly affected by these actions and the wider UK banking system remains safe, sound, and well-capitalized.
The rescue operation to save Silicon Valley Bank UK was led by UK Chancellor of the Exchequer Rishi Sunak, Jeremy Hunt, and City minister Andrew Griffith, with involvement from Bank of England Governor Andrew Bailey and Sam Woods from the Prudential Regulation Authority. The negotiations were said to be “fully competitive,” with multiple parties interested in acquiring the struggling bank.
Sunak, who was attending a defence summit with leaders of the US and Australia in California, was reportedly heavily involved in the overnight talks. HSBC emerged as the successful bidder and acquired SVB UK for a nominal fee of £1.
HSBC CEO Noel Quinn said the acquisition “makes excellent strategic sense” for the bank’s UK business. SVB UK will become part of HSBC’s ringfenced UK business, which has over 14 million customers and 18,500 staff. The acquisition is expected to strengthen HSBC’s commercial banking franchise and enhance its ability to serve innovative and fast-growing firms in the UK and internationally.
The collapse of SVB’s parent company in the US had caused concerns about the stability of the UK banking sector, but the Bank of England stressed that no other UK banks were directly affected by the situation. The bank took action to stabilize Silicon Valley Bank UK and ensure the continuity of banking services to minimize disruption to the UK technology sector and support confidence in the financial system.
HSBC announced that it would provide a final calculation of the gain from the acquisition of SVB UK in the near future and that the funding for the purchase would come from its existing resources. Meanwhile, Chancellor Hunt had warned on Sunday that there was a “serious risk” to tech and life sciences firms that relied on SVB UK, with senior leaders saying that they might be unable to pay bills and wages in the upcoming week. The government spent the weekend in a rush to sell SVB UK, which holds £6.7bn of deposits and £5.5bn of loans, and developed a contingency strategy to support companies that have deposits stuck in the bank. On Sunday evening, US regulators announced that SVB’s American depositors would have access to all of their money on Monday.
According to sources familiar with the UK government’s efforts to sell SVB UK, a buyer from the Middle East was one of the top contenders, similar to rescues after the 2008 financial crisis. Bids were also submitted by British banks OakNorth and the Bank of London, with the latter leading a group of private equity firms. SVB UK serves 3,300 UK clients, including start-ups, venture-backed firms, and funds. However, many of these customers have deposits that are below the £85,000 limit covered by the financial insurance scheme.
In an interview with BBC’s Laura Kuenssberg, Chancellor Jeremy Hunt was asked if he would guarantee 100% of deposits. He responded, “We want to find a way that minimises, or if we possibly can, avoids all losses to these incredibly promising companies.” Meanwhile, Rishi Sunak echoed the Bank of England’s position that the failure of SVB’s UK bank did not pose “a systemic contagion risk.”
About Silicon Valley Bank
Silicon Valley Bank is a commercial bank that primarily serves technology, life sciences, and venture capital industries. Founded in 1983, the bank is headquartered in Santa Clara, California, and operates in 29 offices across the United States, as well as in international locations such as the United Kingdom, China, and India. Silicon Valley Bank provides a wide range of financial services to innovative companies, including corporate banking, investment banking, asset management, and wealth management.