The UK government has struck a last minute deal with HSBC to buy Silicon Valley Bank’s UK operations for just £1.
The takeover will override the Bank of England’s initial decision to place SVB UK into insolvency and could save thousands in Britain’s tech and life sciences sectors from major losses.
A run on the lender was sparked in recent days by fears over a multibillion-pound shortfall on the US parent company’s balance sheet. The US bank was closed and its assets seized by authorities on Friday.
SVB’s UK division, SVB UK, reportedly has around 3,500 customers, mostly from among the tech and life science sector, and holds around $7bn in customer deposits.
Only £85,000 of individual clients’ deposits would have been protected by the Financial Services Compensation Scheme, meaning many of SVB UK’s 3,500 customers could have faced major losses without government intervention.
A joint letter signed by over 200 tech executives over the weekend said many companies were facing becoming “technically insolvent” after SVB UK collapse.
The US treasury secretary, Janet Yellen, said on Sunday there would be no bailout for Silicon Valley Bank, but that the Biden administration was working closely with regulators to help depositors caught up in its collapse. Biden is due to speak on Monday morning US time, and his government has already claimed that depositors in the US bank will be able to retrieve their funds, although taxpayers would not fot the bill.
UK prime minister Rishi Sunak and chancellor Jeremy Hunt, meanwhile, signalled on Sunday that they were exploring a range of options, including an emergency fund that could provide a cash lifeline to support startups, as bidders put their hat in the ring for a potential takeover of the UK subsidiary. UK high street banks as well as Middle East funds were touted as early favourites for a potential rescue of the UK arm.
The acquisition, which only cost HSBC £1, followed overnight talks between Downing Street, the Bank of England and HSBC bosses including the chief executive, Noel Quinn, as authorities rushed to protect the finances of SVB UK’s customers.
Dom Hallas, chief of the UK’s Coalition for a Digital Economy thanked the government for its quick response to the situation:
The Government deserves huge credit. From the very top, to HM Treasury who understood the challenge and gripped it, to the PRA, to the huge number of civil servants who have likely not slept since Friday. They have saved hundreds of the UK’s most innovative companies today.
— Dom Hallas (@Dom_Hallas) March 13, 2023
