Topline
HSBC on Monday announced it was acquiring the U.K. arm of failed Silicon Valley Bank (SVB), throwing a much needed lifeline to the country’s tech and life sciences sectors and ending a frenzied weekend of negotiations, as officials and industry leaders rush to contain fallout from the largest U.S. banking failure since the 2008 financial crisis.
HSBC bought SVB UK for £1.
Key Facts
HSBC purchased Silicon Valley Bank UK (SVB UK) for $1.21 (£1), the company said in a statement.
The deal, facilitated by the Bank of England and the U.K. government, completes immediately and will be funded from the bank’s existing resources.
HSBC, Europe’s largest bank and one of the biggest financial institutions in the world, said it will take on loans of around $6.7 billion (£5.5 billion) and deposits of $8.1 billion (£6.7 billion) from SVB UK, adding that assets and liabilities of its parent company are excluded from the deal.
HSBC Group chief executive Noel Quinn said the acquisition “makes excellent strategic sense” for the bank’s U.K. business and enhances its ability to serve “innovative and fast-growing firms” in sectors like tech and biotech, both in the U.K. and internationally.
The Bank of England said SVB UK “customers should not notice any changes” following the deal, adding that depositors’ money “is safe and secure as a result of this transaction.”
U.K. treasury chief Jeremy Hunt said the deal will help protect Britain’s tech sector and that SVB UK deposits will be protected “with no taxpayer support.”
News Peg
At the time of its collapse on Friday, SVB was the 16th largest bank in the country. Though small compared to heavy hitters like JPMorgan Chase and the Bank of America, its failure has sent shockwaves throughout the sector and officials, concerned the collapse might trigger a broader financial crisis, have moved swiftly to bolster confidence. Federal regulators on Sunday moved to protect all deposits at SVB and stave off crises at other institutions, though they ruled out bailouts for investors like in the past. As its name suggests, SVB was a key lender to the tech sector as well as to startups and its loss has been felt keenly in tech circles.
What To Watch For
SVB’s U.K. subsidiary is a relatively recent offshoot and small in comparison to its American parent. While its rescue is welcome, particularly in the U.K., concerns remain over the fallout yet to come from the collapse of its parent. Large parts of SVB’s business came from abroad and it reports offices in countries including Sweden, Germany, Denmark, Israel, Canada and India. Germany’s regulator on Monday imposed a moratorium on the bank’s German branch, stressing there was no “threat to financial stability.” Other international regulators are also monitoring the situation, particularly over the risk of SVB’s collapse precipitating a wider crisis at other institutions, including in Asian markets like Hong Kong, Japan, South Korea and India.
Tangent
Shares of First Republic Bank fell around 60% in premarket trading in New York on Monday, according to Bloomberg. The fall follows concerns over the bank’s liquidity and continued despite it issuing a statement on Sunday saying it had more than $70 billion in unused liquidity from sources including JPMorgan Chase and the Federal Reserve.
Further Reading
Here Are the Biggest Asian Companies Caught in SVB’s Fallout (Bloomberg)
Why Silicon Valley Bank was so important to UK tech sector (Guardian)
What To Know About Silicon Valley Bank’s Collapse—The Biggest Bank Failure Since 2008 (Forbes)
Source: https://www.forbes.com/sites/roberthart/2023/03/13/hsbc-rescues-silicon-valley-bank-uk-arm-as-bank-collapse-fallout-spreads-around-world/