The UK arm of collapsed US lender Silicon Valley Bank has been bought by HSBC after the Government and Bank of England stepped in to “facilitate” a private sale.
Chancellor Jeremy Hunt confirmed that all customer deposits have been protected under the deal, with no taxpayer cash involved.
It comes after the US government moved to stop a potential banking crisis after the historic failure of Silicon Valley Bank, with all deposits protected, amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread.
Mr Hunt said: “Today the Government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK. This ensures customer deposits are protected and can bank as normal, with no taxpayer support.
“I am pleased we have reached a resolution in such short order.
“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them.”
This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC
Deposits will be protected, with no taxpayer support
I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise
— Jeremy Hunt (@Jeremy_Hunt) March 13, 2023
HSBC and the Treasury said customers of SVB UK will be able to access their deposits and banking services as normal following the sale to HSBC for a nominal sum of £1.
There had been mounting worries that the collapse of SVB – the second-largest bank failure in history – could also have sent shockwaves through the technology and life sciences sector in the UK, with many of those firms customers of the bank’s British business.
SVB UK had around £6.7 billion of deposits and loans of about £5.5 billion as at Friday last week, while its balance sheet stood at £8.8 billion, according to the Bank of England.
But the Bank said the “scale of the deterioration of liquidity and confidence means that, in the view of the Bank and the PRA, the position was not recoverable”.
“Therefore, the Bank of England decided, in consultation with HM Treasury, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), to use the resolution powers for stabilising failing banks that were brought in following the financial crisis,” it added.
The Bank stressed that all services will continue to operate as usual at SVB UK following the deal, with all staff remaining employed by the bank.
“Customers can continue to contact SVB UK through the usual channels and borrowers should make any loan repayments to SVB UK as normal,” it said.
The wider UK banking system “remains safe, sound, and well capitalised”, the Bank added.
HSBC also moved to reassure SVB UK customers and said the deal “makes excellent strategic sense for our business in the UK”.
Group chief executive Noel Quinn said: “SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC.
“We warmly welcome SVB UK colleagues to HSBC, we are excited to start working with them.”
SVB imploded and had its assets seized by US regulators on Friday, marking the largest failure of a bank since the 2008 financial crisis.
Statement from DG @mooremichaelk: "The sale of Silicon Valley Bank in the UK to HSBC is welcome news. Confidence should return to markets and the affected businesses with an orderly transition and access to the cash frozen over the weekend. We continue to monitor the situation."
— BVCA (@BVCA) March 13, 2023
The Bank of England had subsequently said it intended to order the UK subsidiary into insolvency from Sunday night, sparking a scramble to secure a rescue deal before the deadline, with talks going late into the evening.
The Bank of London – a UK clearing bank – was among firms that were involved in early-stage talks and had put forward a rescue bid for SVB UK.
It criticised the sale to HSBC as a “missed opportunity”.
Bank of London said: “For many, this will be seen as a missed opportunity to support competition and innovation.
“It cannot be right that, once again, the heritage banks that have provided a poor service to UK entrepreneurs over many years benefit from their already dominant position.”
But the British Private Equity & Venture Capital Association (BVCA) – the industry body representing venture capital investors, which hold thousands of investments in UK tech and science firms, many of which have accounts with SVB UK – said the deal is “welcome news”.
BVCA director-general Michael Moore said: “Confidence should return to markets and the affected businesses with an orderly transition and access to the cash frozen over the weekend.
“We are continuing to monitor the situation and will analyse the details as they emerge later.”
