HSBC acquires Silicon Valley Bank UK in a last-minute deal, asserts that all depositors’ money is safe.
Silicon Valley Bank UK is being acquired by HSBC UK for a symbolic £1. The deal follows a tense weekend of frantic negotiations by the United Kingdom government, regulators, and a slew of other potential suitors in the aftermath of the U.K. business, a subsidiary of the troubled US entity, entering insolvency procedures on Friday.
The deal is a huge relief for the UK technology sector, which was heavily impacted by the failure of both SVB and its UK arm. The deal’s quick turnaround will be interpreted as a sign of the government’s support for technology and overall confidence in the financial system.
According to HSBC, the transaction “completes immediately.” The acquisition will be paid for with existing funds. In a statement, the bank added:
“As at 10 March 2023, SVB UK had loans of around £5.5 billion and deposits of around £6.7 billion. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88 million. SVB UK’s tangible equity is expected to be around £1.4 billion. Final calculation of the gain arising from the acquisition will be provided in due course.”
The Bank of England stated that all deposits with SVB UK are safe and that the agreement ensures the continuity of banking services.
It means that SVB UK will not go bankrupt.
“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” said UK Chancellor Jeremy Hunt.
More from Hunt and the government can be found here. The Bank of England stated in a statement:
“SVB UK’s business will continue to be operated normally by SVB UK. All services will continue to operate as normal and customers should not notice any changes.
Customers can continue to contact SVB UK through the usual channels and borrowers should make any loan repayments to SVB UK as normal. SVB UK staff remain employed by SVB UK, and SVB UK continues to be a PRA/FCA-authorised bank.
Today’s announcement supersedes the Bank’s 10 March statement that absent any meaningful further information, it intended to apply to the Court to place SVBUK into a Bank Insolvency Procedure. Given the emergence of a credible purchaser for SVBUK the Bank has determined that using its resolution powers for stabilizing failing banks is appropriate.
No other UK banks are directly materially affected by these actions, or by the resolution of SVBUK’s US parent bank. The wider UK banking system remains safe, sound, and well capitalized.”
In a statement, HSBC Group CEO Noel Quinn welcomed Silicon Valley Bank UK customers, saying they could continue to bank as usual:
“This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.
We welcome SVB UK’s customers to HSBC and look forward to helping them grow in the UK and around the world. 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.”
“The Government deserves huge credit,” said Dom Hallas, Executive Director of Coadec, a UK non-profit that lobbyed government on behalf of tech startups. From the very top, to HM Treasury, which grasped the challenge, to the vast majority of civil servants who have most likely not slept since Friday. Today, they have saved hundreds of the UK’s most innovative businesses.”
The sale means that the UK will avoid having to implement the system-wide support that the US Treasury was forced to implement to protect depositors. And, because a bank has stepped in to save another bank, it reduces the risk of “moral hazard,” in which failed banks and depositors believe the only way out is for the government to bail them out.