Global banking giant HSBC has acquired the UK subsidiary of now-collapsed lender Silicon Valley Bank for £1 ($1.21) after all-night talks between the government, regulators, and other prospective buyers.
The deal excludes the assets and liabilities of SVB UK’s parent company.
As of March 10, the UK arm of SVB had loans of around £5.5 billion ($6.7 billion) and deposits of around £6.7 billion ($8.1 billion), HSBC said in an official announcement.
Furthermore, the bank had £88 million of full-year profit before tax in 2022. HSBC said it expects SVB U.K.’s tangible equity to be around £1.4 billion but added that the “final calculation of the gain arising from the acquisition will be provided in due course.”
The acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the U.K. and internationally,” said HSBC Group CEO Noel Quinn. He added:
“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 SVB UK colleagues to HSBC, we are excited to start working with them.”
The sale was facilitated by the Bank of England in consultation with the U.K. Treasury. HSBC added that the acquisition will be funded from existing resources and would be completed immediately.
The announcement came amid reports that British ministers and the Bank of England held talks with regulators and some prospective buyers all-night, racing to conclude a private sale of Silicon Valley Bank’s UK arm before markets opened on Monday.
British Finance Minister Jeremy Hunt was reportedly in favor of a private sale as it would not then require the government to make a big intervention to protect depositors.
On Sunday, Hunt said there was “a serious risk” to tech and life sciences companies that used SVB’s UK bank, with senior founders warning of “carnage” if they were unable to pay wages and bills in the coming week.
US Intervenes in Banking Crisis
Meanwhile, in the US, regulators approved plans to backstop depositors and financial institutions linked with parent company SVB and another crypto-friendly bank, Signature Bank, which was shuttered Sunday over similar systemic contagion fears.
Depositors at both failed SVB and Signature Bank will have full access to their deposits as part of multiple moves that officials approved over the weekend. Signature had been a popular funding source for cryptocurrency companies.
It is worth noting that some major crypto companies were also severely affected by the collapse of Silicon Valley Bank and Signature Bank. For one, USDC issuer Circle has $3.3 billion of its USDC reserves at the collapsed lender.
The news initially led to a wave of withdrawals and redemptions that led to USDC distancing away from its targeted peg of $1. However, the stablecoin has mostly corrected its losses over the past day, surging to around $0.99 at the time of writing.
The banking giant HSBC has recently acquired the UK branch of Silicon Valley Bank (SVB) for £1. This follows several months of negotiations and strategic planning that began when SVB parent company SVB Financial Group announced in March that its international businesses, including its UK banking operations, would be sold. In light of the current economic crisis wrought by the Covid-19 pandemic, the acquisition is aimed at safeguarding customers and taxpayers.
The effects of Covid-19 have been disproportionately damaging to UK banking sector. The Competition and Markets Authority (CMA) granted approval of the deal on 30th September, citing the concerns caused by the “challenging conditions” afflicting UK banking markets.
In the wake of the deal, customers of SVB will be seamlessly transitioned to HSBC’s own customer services and products. This is sure to be a positive move for customers of the two banks, affording them a much broader range of global banking options.
It has been reported that SVB’s operations in the UK will continue for the time being, as its customers in the US and Asian branches remain unaffected. Additionally, the same management operating structure will stay in place until further notice.
For taxpayers, the acquisition may allow increased stability within the banking sector and bolster liquidity in the domestic markets. The injection of funds and investment from HSBC will help shore up protection for customers of both banks.
The move marks a strategic victory for HSBC, helping to expand its operations and presence in the UK banking market, as well as the worlds of technology and innovation. The terms of the deal illustrate a note of caution, however, as the purchase price was a nominal fee of just £1.
This acquisition serves as a reminder of the immense pressure and uncertainty faced by the UK banking market, and shows the strength and resilience of the sector as a whole. HSBC’s decision to purchase Silicon Valley Bank UK is undoubtedly a positive one, and customers, taxpayers, and shareholders alike can look forward to the new opportunities brought by the partnership.