by HSBC has bought the UK arm of collapsed US lender Silicon Valley Bank in a last-minute bailout to avert a crisis in Britain’s tech sector.
The sale – for a notional amount of £1 – was agreed after late night talks between the government and the Bank of England to try and secure a sale of Silicon Valley Bank UK (SVB UK) amid fears that the tech sector would would have been thrown into chaos amid the aftermath of the California-based lender’s failure.
Chancellor Jeremy Hunt warned that some of Britain’s leading tech companies would have been “wiped out” if no solution had been found after the Silicon Valley bank collapsed last Friday.
However, he confirmed that all customer deposits were protected as part of the sale to HSBC without taxpayers’ money being involved.
Customers and businesses who have been unable to withdraw money since Friday’s collapse can now access cash as usual, he added.
The US government also took steps to stem a potential major banking crisis after the Silicon Valley Bank collapse — the largest bank failure since the 2008 financial crisis — by stepping in to protect all customer deposits.
It came as the spread began to take hold as regulators announced that New York-based Signature Bank had also failed and was seized on Sunday.
However, financial markets remained skeptical that the contagion was being contained as the FTSE 100 index fell almost another 2% on Monday despite coordinated measures.
Banks and financial stocks were among those that suffered more sharp losses after Friday’s plunge.
Mr Hunt told broadcasters there was “never a systemic risk to our financial stability in the UK” from the failure of SVB UK, but warned of the danger British businesses faced on Monday morning if a way out was not found.
He said: “When you have very young companies, very promising companies, they are also fragile.
“They have to pay their staff and were concerned that at 8am this morning they would literally lose access to their bank account.
“As a result, we were faced with a situation where we could have seen some of our most important businesses, our most strategic businesses, wiped out and that would have been extremely dangerous.”
Prime Minister Rishi Sunak is understood to have been involved in the bailout talks over the weekend, along with Mr Hunt and Bank of England Governor Andrew Bailey.
SVB specializes in lending to start-up technology companies and is a key banking partner for venture capital firms with over 3,000 clients in the UK.
SVB UK had around £6.7 billion in deposits and around £5.5 billion in loans as of Friday last week, while its balance sheet stood at £8.8 billion, according to the Bank of England.
However, the bank said that “the extent of the deterioration in liquidity and confidence means that the position was, in the opinion of the bank and the Prudential Regulation Authority, unrecoverable”.
It therefore intervened to use resolution powers to stabilize insolvent banks brought in after the financial crisis.
The bank stressed that all services at SVB UK will continue as usual after the transaction, with all staff remaining employed at the bank.
The broader UK banking system “remains safe, sound and well capitalised,” the bank added.
HSBC also moved to reassure SVB UK customers, saying the deal “makes strategic sense for our UK business”.
Group Chief Executive Noel Quinn said: “SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are protected by the strength and security of HSBC.”
SVB imploded and its assets were seized by U.S. regulators on Friday, just two days after Silvergate Capital, a key crypto industry lender, announced last Wednesday that it would cease operations and liquidate its bank.
The Bank of England responded by saying it intended to declare its UK subsidiary bankrupt from Sunday night, sparking a scramble to get a bailout deal before the deadline.
The Bank of London – a UK clearing bank – was among the firms involved in early-stage talks and had put forward a bid to bail out SVB UK.
She slammed the sale to HSBC as a “missed opportunity”.
The Bank of London said: “It cannot be right that the traditional banks, which have provided a poor service to British entrepreneurs for many years, are once again capitalizing on their already dominant position.”
But the British Private Equity & Venture Capital Association (BVCA) – the industry body representing venture capital investors holding thousands of investments in British technology and science companies, many of whom have accounts with SVB UK – said the deal was “welcome news”. “. .
BVCA Director General Michael Moore said: “Confidence in the markets and affected companies should return with an orderly transition and access to the cash frozen over the weekend.”
