HSBC acquires Silicon Valley Bank UK for £1 to protect customers and taxpayers – What’s going on?

Global banking giant HSBC acquired the now-collapsed lender’s UK subsidiary Silicon Valley Bank for £1 ($1.21) after overnight talks between the government, regulators and other potential buyers.

The agreement 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 pounds ($6.7 billion) and deposits of around 6.7 billion pounds ($8.1 billion), HSBC said in an official statement.

Additionally, the bank made an annual pre-tax profit of £88 million in 2022. HSBC said it expects SVB UK’s tangible equity to be around £1.4 billion. sterling, but added that “the final calculation of the gain resulting 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 businesses, including in the technology and life sciences sectors, in the UK and internationally”, said Noel Quinn, HSBC Group CEO. He added:

“SVB UK customers can continue to bank as usual, knowing that their deposits are backed by the strength, safety and security of HSBC. We welcome our colleagues from SVB UK to HSBC, we are excited to start working with them.”

The sale was facilitated by the Bank of England in consultation with the UK Treasury. HSBC added that the acquisition will be financed from existing resources and will be finalized immediately.

The announcement came amid reports that UK ministers and the Bank of England had been holding talks with regulators and some potential buyers overnight, rushing to complete a private sale of the UK branch of Silicon. Valley Bank before markets open on Monday.

UK Finance Minister Jeremy Hunt reportedly favored a private sale as it would not require the government to intervene massively to protect depositors.

On Sunday, Hunt said there was “serious risk” to tech and life sciences companies using Britain’s SVB bank, with senior founders warning of “carnage” if they weren’t in able to pay wages and bills in the coming week.

The United States intervenes in the banking crisis

Meanwhile, in the United States, regulators have approved plans to support depositors and financial institutions linked to parent company SVB and another crypto-friendly bank, Signature Bank, which was closed on Sunday due to fears. of similar systemic contagion.

Depositors at bankrupt SVB and Signature Bank will have full access to their deposits under several moves officials approved over the weekend. Signature was a popular funding source for cryptocurrency companies.

It should be noted that some major crypto companies were also badly affected by the collapse of Silicon Valley Bank and Signature Bank. For one thing, USDC issuer Circle has $3.3 billion of its USDC reserves at the collapsed lender.

The news initially led to a wave of drawdowns and redemptions that led the USDC to break away from its target peg of $1. However, the stablecoin mostly corrected its losses over the past day, hitting around $0.99.