HSBC to buy Silicon Valley Bank UK after crisis talks over the weekend

HSBC is buying the collapsed Silicon Valley bank’s UK arm for £1 in a private sale facilitated by the government and the Bank of England.

The Bank of England announced on Friday that Silicon Valley Bank UK had entered bankruptcy, following the collapse of its parent company in the United States – the biggest bank failure since the 2008 financial crisis.

It comes after the US government moved to stop a potential banking crisis following the historic failure of Silicon Valley Bank, with all deposits protected, amid fears that the factors that led to the failure of the Santa Clara, California-based bank could to spread.

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HSBC said it had bought the bank’s UK subsidiary for just £1.

Chancellor Jeremy Hunt confirmed the news in a tweet, saying: “This morning the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC.

“Deposits will be protected, without taxpayer support. I said yesterday that we would take care of our technology sector and we have worked urgently to deliver on that promise.”

The Bank of England said all deposits are “safe” after the sale.

Their statement added: “The Bank of England (Bank), in consultation with the Prudential Regulation Authority (PRA), HM Treasury (HMT) and the Financial Conduct Authority (FCA), has taken the decision to sell Silicon Valley Bank UK Limited (“SVBUK”), the UK subsidiary of the US bank, HSBC UK Bank Plc (HSBC). HSBC is authorized and supervised by the PRA and the FCA.’

Mr Hunt added: “The UK technology sector is truly world-leading and hugely important to the UK economy, supporting hundreds of thousands of jobs.

“I said yesterday that we would look after our technology sector and we have worked urgently to deliver on that promise and find a solution that will give 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 banking can be done as normal, without support from taxpayers. I am glad that we have reached a resolution in such a short time.

“HSBC is Europe’s largest bank and SVB UK customers should feel reassured by the strength, safety and security it offers them.”

In a statement, HSBC chief executive Noel Quinn said the acquisition made “excellent strategic sense”.

“We welcome SVB UK clients 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 the SVB UK colleagues to HSBC, we are excited to start working with them,” Mr Quinn said in a statement.

The Bank of London – a UK clearing bank that had also submitted a rescue bid for SVB UK – criticized the sale to HSBC as a “missed opportunity”.

He said: “For many, this will be seen as a missed opportunity to support competition and innovation.

“It is not right that legacy banks that have provided poor services to UK business people for many years should once again benefit from their already dominant position.

“Britain needs better. For our part, we at the Bank of London stand ready to serve the UK business community.”

Tom Tugendhat, MP for Tonbridge and former Tory leadership candidate, tweeted that it represented a “big deal”.

He wrote: “[This is] much for GB technology – avoid disruptions. UK taxpayers – it costs us nothing and supports ideas, jobs and future taxes. and HSBC’s shareholders – opens up an important sector of the economy to them. Well done @hmtreasury.”

The near financial crisis that U.S. regulators had to step in to prevent left Asian markets from reeling as trading opened on Monday.

Japan’s benchmark Nikkei 225 was down about 1.2 percent in morning trade. Australia’s S&P/ASX 200 was down 0.6% at 7,104.30.

South Korea’s Kospi, however, was little changed.

In an effort to boost confidence in the banking system, the Treasury Department, the Federal Reserve and the FDIC said Sunday that all Silicon Valley Bank customers will be protected and have access to their money.

They also announced measures aimed at protecting the bank’s customers and preventing additional bank runs.

“This step will ensure that the U.S. banking system continues to perform its vital role of protecting deposits and providing access to credit to households and businesses in a way that promotes strong and sustainable economic growth,” the agencies said in a statement. joint statement.

Under the plan, Silicon Valley Bank and Signature Bank depositors, including those whose holdings exceed the $250,000 insurance limit, will be able to access their money on Monday.

In a separate move, the Federal Reserve late Sunday announced an extensive emergency lending program aimed at preventing a wave of bank failures that would threaten the stability of the banking system and the economy as a whole.

Fed officials characterized the program as what central banks have done for decades: Lend freely into the banking system so customers can be sure they can access their accounts whenever they need to.

The lending facility would allow banks that need to raise cash to pay depositors to borrow that money from the Fed, rather than having to sell bonds and other securities to raise the money.

Silicon Valley Bank had been forced to dump some of its bonds at a loss to fund customer withdrawals.

Under the Fed’s new program, banks can post these securities as collateral and borrow from the emergency facility.

The Treasury Department has set aside $25 billion to offset any losses incurred under the Fed’s emergency lending facility. Fed officials have said, however, that they don’t expect to use any of that money, since the securities listed as collateral have a very low default risk.

Analysts said the Fed’s program should be enough to calm financial markets on Monday.

“Monday will certainly be a stressful day for many in the regional banking sector, but today’s action dramatically reduces the risk of further contagion,” economists at Jefferies, an investment bank, said in a research note.

Although Sunday’s steps marked the most extensive government intervention in the banking system since the 2008 financial crisis, its actions are relatively limited compared to what was done 15 years ago.

The two failed banks themselves have not been bailed out and taxpayers’ money has not been provided to the banks.

President Joe Biden said Sunday afternoon as he boarded Air Force One in Washington that he would address the state of the banks on Monday.

In a statement, Mr. Biden also said he was “firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen supervision and regulation of the biggest banks so we don’t find ourselves in this position again.” ».

Regulators had to rush to shut down Silicon Valley Bank, a financial institution with more than $200 billion in assets, on Friday when it experienced a traditional bank run where depositors rushed to withdraw their funds all at once.

It is the second largest bank failure in US history, behind only the 2008 bankruptcy of Washington Mutual.

Some prominent Silicon Valley executives feared that if Washington did not bail out the failing bank, customers would make runs to other financial institutions in the coming days.

Share prices fell in recent days at other banks that serve technology companies, such as First Republic Bank and PacWest Bank.

Among the bank’s clients are a range of companies from the California wine industry, where many wineries rely on Silicon Valley Bank for loans, as well as tech startups dedicated to fighting climate change.