HSBC buys UK arm of collapsed Silicon Valley Bank for £1

United Kingdom regulators have announced a resolution to protect creditors of the region’s subsidiary of the collapsed Carlifornia-based lender Silicon Valley Bank (SBV). 

Under a transaction facilitated by the Treasury and the Bank of England (BoE), SBV UK will now be acquired by Europe’s largest bank HSBC for £1, the Treasury announced in a blog post on March 13. 

The regulators also assured that customer funds held in the bank remain intact, and the continuity of banking services has prevented the possibility of SVB UK being forced into insolvency.

“Today, the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customer deposits are protected and can bank as normal, with no taxpayer support. I am pleased we have resolved in such short order,” UK Chancellor Jeremy Hunt said. 

Minimizing risks 

Following the collapse of its parent company, BoE had previously issued a warning that it intended to place SVB UK into insolvency. However, action has been taken to stabilize the bank, ensure the continued provision of banking services, minimize disruption to the UK technology sector, and maintain confidence in the financial system.

Over the weekend, the UK government, regulators, and various potential suitors engaged in frantic negotiations before settling on HSBC. The sale is a relief to customers after SBV was declared insolvent, with U.S. regulators taking over the lender’s management.

Protecting U.S. clients 

The deal in the UK comes after U.S. officials through the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) assured that all SBV clients would be protected and able to access their money.

Notably, the collapse of the cryptocurrency-friendly Silvergate Bank triggered the banking sector crisis in the U.S. At the same time, New York-based Signature Bank also crashed and was seized by regulators. 

U.S. regulators will allow SBV and Signature Bank depositors to access their money on Monday, March 13. The access will also be availed to customers whose holdings exceed the $250,000 insurance limit. 

Indeed, the swift entry of regulators to rescue the banks is part of avoiding systemic effects on the overall financial system when the economy is battling risks of increasing inflation and interest rate hikes.