HSBC buys bankrupt bank Silicon Valley Bank UK
Hundreds of British tech startups were saved from disaster today when HSBC bought the UK branch of the collapsing US lender Silicon Valley Bank.
After intense talks that lasted into the early hours of the morning, Foreign Secretary Jeremy Hunt announced the move this morning before markets opened.
He insisted that all deposits had been protected and that clients will be able to access their deposits and banking services as normal starting today.
But Hunt stressed that no taxpayer financing had been deployed, with the transaction ‘facilitated’ by the Bank of England in consultation with the Treasury, using powers introduced after the 2008 credit crunch.
The FTSE 100 opened marginally lower shortly after the news was announced.
The crisis erupted when California-based parent company Silicon Valley Bank imploded and US regulators seized its assets on Friday, the biggest bank failure since the financial crisis.
Chancellor Jeremy Hunt (pictured jogging near Downing Street this morning) has revealed that Silicon Valley Bank UK had been sold to HSBC.
The FTSE 100 opened marginally lower shortly after the news was announced.
The US government acted to prevent contagion from the banking sector after the bankruptcy, protecting all deposits.
The Bank of England then ordered SVB’s UK subsidiary insolvent from last night.
But that left more than 200 small British tech companies facing potentially catastrophic cash flow problems, with an estimated £2.5bn in capital at SVB.
HSBC is believed to have bought the UK arm for a nominal sum, assuming its liabilities.
Mr Hunt said: “The UK technology sector is truly a world leader and of great importance to the British economy, supporting hundreds of thousands of jobs.”
“I said yesterday that we would take care of our technology sector, and we have worked urgently to deliver on that promise and find a solution that gives SVB UK customers confidence.
‘Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures that customer deposits are protected and they can bank as normal, without taxpayer support. I am pleased that we have reached a resolution in such a short time.
California-based parent company Silicon Valley Bank imploded and US regulators seized its assets on Friday, the biggest bank failure since the 2008 financial crisis.
“HSBC is the largest bank in Europe, and SVB UK clients should take comfort in the strength, security and protection it provides.”
Hunt told broadcasters that the UK banking system is “resilient”.
“We always have to keep an eye on everything that’s going on around the world when it comes to financial stability,” he said.
“But what I would say is that the Bank of England is very clear: the UK banking system is extremely safe and well capitalised.
“And I think we showed that resilience because of what happened over the weekend and the fact that we were able to find a solution so quickly.”
All deposits are “safe and secure” following the sale of Silicon Valley Bank UK to HSBC, the Bank of England said.
In a statement, the BofE said: “The Bank of England (Bank), in consultation with the Prudential Regulation Authority (PRA), HM Treasury (HMT) and the Financial Conduct Authority (FCA), has made the decision to sell Silicon Valley Bank UK Limited (‘SVBUK’), the UK subsidiary of the US bank, to HSBC UK Bank Plc (HSBC).
‘HSBC is authorized and supervised by the PRA and the FCA.
‘This action was taken to stabilize SVBUK, ensuring the continuity of banking services, minimizing disruption to the UK technology sector and supporting confidence in the financial system.
Jeremy Hunt announced the sale of the SVB subsidiary this morning before the markets open
‘The Bank and HMT can confirm that the money of all depositors with SVBUK is safe and secure as a result of this transaction.
‘SVBUK’s business will continue to be operated as normal by SVBUK. All services will continue to function as normal and customers should not notice any changes.
‘Customers can continue to contact SVBUK through normal channels and borrowers should make loan repayments to SVBUK as normal.
“SVBUK staff remain employees of SVBUK, and SVBUK remains a PRA/FCA chartered bank.”
JP Morgan was also among the parties exploring buying the bank’s UK operations, Sky News previously reported.
Oaknorth Bank, a commercial lender founded by former Tory donor Rishi Khosla, had also been in takeover talks, the PA news agency understands.
There was also interest from the Bank of London and the Abu Dhabi state-backed investment vehicle, ADQ, according to Sky.
HSBC Chief Executive Noel Quinn said: “This acquisition makes excellent strategic sense for our UK business.”
A survey of 31 venture capital funds, which have thousands of investments in UK science and technology companies, found that 34 per cent of their portfolio companies, numbering 336, have bank accounts.
More than 200 of them had faced short- or long-term cash flow risk, according to data from the BVCA, the industry body representing venture capital investors, had collapsed SVBUK.
Around £2.5bn of the capital of these companies is locked up with the lender.
The Coalition for a Digital Economy (Coadec), a non-profit organization that campaigns for policies to support digital start-ups, had previously warned that the collapse of SVBUK could have had a significant impact on such companies.
It was feared that many other companies would be affected and the Times newspaper reported that more than 3,000 companies have around £7bn in deposits with the UK subsidiary.
Speaking ahead of the HSBC deal, Hunt had warned that the science and technology sectors were at “serious risk” but said there was no risk to the UK financial system as a whole.