HSBC acquires Silicon Valley Bank UK for £1; offering relief to UK tech startups and investors

On Monday, HSBC announced that it had acquired the UK subsidiary of Silicon Valley Bank for £1.

The UK government further confirmed that HSBC Holdings has acquired the UK asset of troubled startup focussed Silicon Valley Bank.

“This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC,” British finance minister Jeremy Hunt tweeted on Monday.

This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC

Deposits will be protected, with no taxpayer support

I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise

— Jeremy Hunt (@Jeremy_Hunt) March 13, 2023

“This acquisition makes excellent strategic sense for our business in the UK,” HSBC CEO Noel Quinn said in a statement.

Silicon Valley Bank goes under insolvency

After US regulators took control of Silicon Valley Bank last week, the Bank of England sought a court order on Friday to place Silicon Valley Bank UK Limited into an insolvency procedure.

“SVB UK has a limited presence in the UK and no critical functions supporting the financial system. In the interim, the firm will stop making payments or accepting deposits,” the Bank of England said last week.

As part of insolvency proceedings for banks in Britain, some depositors are eligible for up to £85,000 as compensation for lost deposits.

For some joint accounts, the compensation for lost deposits could be £170,000, reports Reuters.

The BoE said other assets and liabilities would be managed by the bank’s liquidators with the aim to pass recovered funds to creditors.

An offer for SVB UK Limited

Before HSBC acquired the UK arm of Silicon Valley Bank, it attracted an offer from a consortium of investors led by The Bank of London.

BBC reported on Monday that the UK clearing bank submitted a formal bid to the Treasury and other lenders, including Barclays and Oaknorth, were said to be mulling bids.

“Silicon Valley Bank cannot be allowed to fail given the vital community it serves,” said Anthony Watson, CEO of the Bank of London. “This is a unique opportunity to ensure the UK has a more diversified banking sector, whilst allowing continuity of service to SVB’s UK client base.”

The collapse of SVB and its UK arm raised the possibility of many startups failing to pay their staff from Monday.

In a letter to finance minister Hunt, more than 200 tech executives called for government intervention and the firms highlighted how they served millions of people in the UK.

“The cost of inaction here means that these firms could fail in the short-term and your technology growth ambitions will fail in the long-term,” the letter said.

HSBC acquired UK arm of SVB

The announcement today by the British government that HSBC has acquired the UK arm of Silicon Valley Bank rescues a key lender for Britain’s tech startup ecosystem.

It is estimated between 30 and 40 per cent of the UK startups with up to 50,000 people employed relied on Silicon Valley Bank UK.

The UK arm of SVB also directly invested in tech companies and has famously backed Wise, a UK-based foreign exchange fintech company.

HSBC’s deal comes after the US regulators assured that all the deposits will be made whole and customers will have access to their funds starting Monday.

HSBC further confirmed that as of March 10, Silicon Valley Bank UK Limited had loans of around £5.5B and deposits of around £6.7B.

The Government deserves huge credit. From the very top, to HM Treasury who understood the challenge and gripped it, to the PRA, to the huge number of civil servants who have likely not slept since Friday. They have saved hundreds of the UK’s most innovative companies today.

— Dom Hallas (@Dom_Hallas) March 13, 2023

As Europe’s largest bank, HSBC will offer reassurance to SVB customers and will stop UK-based technology companies from facing existential threat.

Alongside the announcement, the UK government is maintaining that its banking system is not materially affected by the collapse of Silicon Valley Bank.

“The wider UK banking system remains safe, sound, and well capitalised,” the Bank of England said.

Unlike the US, Britain has not announced broader liquidity measures for the banking system.

HSBC says the transaction “completes immediately” and it plans to fund the acquisition through its existing resources.

The acquisition of Silicon Valley Bank UK Limited by HSBC should be a relief not only for the UK government but also for UK startups and venture funds.

A spokesperson for Silicon Valley Bank UK Limited declined to comment.

The looming question now is whether this will put an end to a chaotic weekend and the bank run that came with it or there is a wider reckoning awaiting tech companies, investors, and regulators around the world.