HSBC Holdings PLC is set to buy the UK arm of Silicon Valley Bank, the culmination of a frantic weekend in which ministers and bankers explored a number of ways to avert the SVB Financial Group unit’s collapse.
The London-listed lender’s “ring-fenced subsidiary, HSBC UK Bank PLC, is acquiring Silicon Valley Bank UK Ltd (SVB UK) for ￡1 [US$1.21],” HSBC said in a statement yesterday.
“This acquisition makes excellent strategic sense for our business in the UK,” CEO Noel Quinn said in the statement. “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.”
Photo: EPA-EFE
Ministers and officials had spent the weekend drafting plans to ringfence the UK’s technology and life sciences industries, following warnings that they would be crippled without intervention.
Although small compared with the UK’s largest banks, SVB has an outsized role in the world of start-ups, describing itself as “the go-to banking partner for founders, entrepreneurs and investors.”
British Chancellor of the Exchequer Jeremy Hunt yesterday said HSBC’s rescue of SVB’s UK arm was necessary to help protect some of Britain’s most important technology companies.
“We were faced with a situation where we could have seen some of our most important companies — our most strategic companies — wiped out, and that would have been extremely dangerous,” Hunt told reporters.
He said the British Treasury had been neutral as to what the solution for SVB’s UK arm was, and his priority was to avoid using British taxpayer money.
“We were looking at all options and we needed to be sure that if the sale didn’t happen, we had other solutions ready,” Hunt said.
“The UK banking system is extremely secure, it’s well capitalized,” he added.
A host of lenders were mooted as possible buyers.
Nascent clearing institution Bank of London Group Ltd in a statement on Sunday said that it submitted a formal proposal to the British Treasury, the Bank of England and the board of SVB UK.
Royal Group, an investment firm controlled by a top Abu Dhabi royal, and Softbank Group Corp-backed OakNorth Bank Ltd were also among those considering a takeover.
Another plan was for lenders to take on depositors from SVB Financial Group’s British arm. Several big banks would have taken on SVB’s depositors, offering them access to money until their funds were released from the lender.
The leaders of about 180 technology firms had said in an open letter to Hunt that the loss of deposits at SVB would have the potential to cripple the sector and set the ecosystem back 20 years.
“This is an urgent matter. Help is needed by tomorrow,” British Private Equity and Venture Capital Association director-general Michael Moore said before the Treasury’s intervention. “Long-term support will be required to protect the UK’s innovators, entrepreneurs and funders.”
The announcement comes after US financial regulators moved on Sunday to assure all depositors their money is safe following the collapse of Silicon Valley Bank, and established a new lending program offered by the US Federal Reserve with funds from the US Department of the Treasury.
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