HSBC takes over the British arm of Silicon Valley Bank.
(Photo: Reuters)
London British tech companies have reacted with relief to the rescue of the Silicon Valley Bank (SVB) in Great Britain. “The government deserves a lot of credit,” said Dom Hallas, chief executive of British technology association Coadec. The parties would have “saved hundreds of the most innovative companies in the UK”.
The major bank HSBC took over SVB UK on Monday morning for the symbolic purchase price of one pound. The bailout came after crisis talks between the Bank of England and the UK government. “This morning the Government and Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC. Depositors will be protected with no burden on the taxpayer,” Treasury Secretary Jeremy Hunt tweeted.
It was particularly important for the Conservative government in London to achieve the rescue without public funds. A bailout at the expense of the taxpayer would hardly have been plausible after the state had rescued the British banks with billions in aid during the financial crisis in 2008 and was subsequently heavily criticized for this.
Hunt had emphasized over the weekend that the government was not only concerned with short-term liquidity support, but also with a long-term solution. “It’s about the most promising companies in our economy,” said the finance minister. British Prime Minister Rishi Sunak has put the promotion of the start-up industry at the center of his economic policy under the motto “Innovation Nation”. Sunak recently announced that he wants to make Great Britain the “next Silicon Valley”.
The Bank of England declared SVB UK bankrupt on Friday after the American parent company went bankrupt. “The Bank and Treasury can confirm that the funds of all depositors in SVB UK are safe as a result of this transaction,” the central bankers wrote on Monday following the HSBC takeover. SVB UK’s business would continue as normal. All services would be offered as usual and customers should not notice any changes.
No other UK bank is directly affected by these measures or by the resolution of SVB UK’s US parent bank, the Bank of England said in its statement. “The UK banking system at large remains safe, sound and well capitalised.”
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“This acquisition makes a lot of strategic sense for our business in the UK,” said HSBC Chief Executive Noel Quinn. “It strengthens our commercial banking business and enhances our ability to serve innovative and fast-growing businesses, including in technology and life sciences.”
SVB UK had around £5.5 billion in outstanding loans and around £6.7 billion in deposits, HSBC said.
In the past financial year 2022, SVB UK had a pre-tax profit of £88 million. The assets and liabilities of SVB UK’s parent companies are excluded from the transaction.
Stock exchange prices of banks and insurance companies fall
Many listed companies in the UK assured their investors on Monday morning that they had either not used the Silicon Valley Bank at all or hardly at all. Nevertheless, the stock exchange in London reacted with losses after the start of trading, with shares in banks and insurance companies being particularly affected.
However, analysts see only minor risks for European banks. “European banks have less concentration of deposits, still have relatively healthy deposit flows, operate with large liquidity portfolios and remain well capitalized,” wrote Andre Coombs of US major bank Citigroup.
More: HSBC takes over British subsidiary of Silicon Valley Bank