Silicon Valley Bank collapses – HSBC acquires UK branch

Monday 13 March 2023 15:11 CET | News

HSBC has acquired the UK arm of Silicon Valley Bank, securing the deposits of thousands of British tech firms that hold money at the lender, amid the US collapse.

HSBC confirmed that its UK ring-fenced subsidiary, HSBC UK Bank, had agreed to acquire SVB U.K. for GBP 1. The assets and liabilities of SVB UK’s parent company are excluded from the transaction.

HSBC acquires the UK arm of Silicon Valley Bank, securing the deposits of thousands of British tech firms that hold money at the lender.

As of 10 March, SVB UK had loans of around GBP 5.5 billion and deposits of around GBP 6.7 billion, with GBP 88 million of full-year profit before tax in 2022. The bank expects SVB U.K.’s tangible equity to be around GBP 1.4 billion but added that ‘final calculation of the gain arising from the acquisition will be provided in due course’.

The sale, facilitated by the Bank of England in consultation with the UK Treasury, will protect the deposits of SVB UK clients, the Treasury said in a statement.

The potential buyers

A host of potential buyers had submitted proposals to purchase SVB UK since the failure of its US parent company, amid widespread concern over the immediate futures of many British tech and life sciences startups.

A consortium of investors led by The Bank of London, a UK clearing bank, had submitted a formal bid to the Treasury. As a clearing bank, the Bank of London does not lend and holds all its deposits with the Bank of England.

The affected parties

The news comes as US customers have been told their deposits will be fully protected by the US government, putting pressure on the UK government to act.

The bank's UK subsidiary was put into insolvency on Sunday evening, allowing individual depositors to be paid up to GBP 85,000 from the UK's deposit insurance scheme – however many have far more money than this saved with the bank.

More than 200 leaders of UK tech companies signed a letter calling for government intervention. The letter said many financial technology firms did all of their banking with SVB ‘and will therefore go into receivership imminently unless preventative action is taken’.

Therefore, somewhere between 30% and 40% of UK startups employing up to 50,000 people could be affected by the collapse. Globally, however, some companies are already offering their support. Deel, the HR platform and payroll solution for global teams, makes USD 120 million USD of its own money available to support startups' payroll operations in the aftermath of the Silicon Valley Bank (SVB) crisis. This was announced by Alex Bouaziz, co-founder and CEO, who is partnering with Andreessen Horowitz (a16z) and Y Combinator - both investors in Deel to provide this support.

The global situation

SVB collapsed in the US after failing to raise USD 2.2 billion to plug a loss from the sale of assets, mainly US government bonds, that were affected by higher interest rates. Its troubles prompted a run on the bank in the US and sparked investor fears about the general state of the banking sector.

As part of their moves to restore confidence, regulators unveiled a new way to give banks access to emergency funds. The Federal Reserve said it would offer assistance through a new Bank Term Funding Program, making it easier for banks to borrow from it in a crisis.

Recent news coming from Germany, however, says that the Federal Financial Supervisory Authority (BaFin) has issued a ban for Silicon Valley Bank Germany Branch on disposals and payments, as the institution is at risk of being unable to meet its obligations towards its creditors. In addition, BaFin has ordered that the bank be closed for business with customers.

Information is still coming through as to assess the implications of SVB’s crash considering its global presence. Taking into account the fact that many voices in the industry blame the bank’s crash on increasingly hiked interest rates across the globe, Reuters points out that all eyes are now on the European Central Bank, which is set to deliver another significant hike in interest rates this Thursday, on 16 March.

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Keywords: banks, acquisition, financial services, financial institutions, transactions
Categories: Banking & Fintech
Companies: HSBC, Silicon Valley Bank
Countries: United Kingdom, United States
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Banking & Fintech



Silicon Valley Bank

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