HSBC pays £1 to save UK arm of collapsed Silicon Valley Bank
HSBC has taken over the UK arm of collapsed lender Silicon Valley Bank for £1 in a deal that protects more than 3,000 customers’ deposits and spares taxpayers from bailing them out.
The emergency takeover comes after frantic talks over the weekend involving the Chancellor, the Prime Minister and the Bank of England to prevent swathes of the tech sector from being wiped out.
Customers of Silicon Valley Bank UK, some of whom had millions of pounds in deposits, regained access to their money yesterday after being frozen out.
The deal announcement came hours after American authorities moved to guarantee the deposits of the bank’s US parent company, which collapsed on Friday.
Chancellor Jeremy Hunt had warned over the weekend that the UK tech sector was at ‘serious risk’ from the collapse of SVB UK.
He pledged on Sunday that the Government would bring forward immediate plans to help companies banking with the firm with their immediate cashflow needs – such as paying staff.
Among those believed to have been frozen out of accessing funds was an IT provider to the NHS.
Announcing the HSBC deal, Mr Hunt said: ‘The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs. I said [on Sunday] that we would look after our tech sector, and we have worked urgently to deliver on that promise and find a solution that will provide SVB UK’s customers with confidence.’
One Tory MP described it as the ‘perfect solution’, and the Bank of England said it ‘can confirm that all depositors’ money with SVB UK is safe and secure as a result of this transaction’.
SVB UK had loans of around £5.5billion and deposits of £6.7billion at the time of its collapse on Friday, HSBC said.
Mr Hunt said the collapse had never posed ‘a systemic risk to our financial stability’ but said important strategic firms could have been wiped out, which would have been ‘extremely dangerous’.
The deal did not prevent further falls in banking shares with Barclays down 6 per cent, HSBC off by 4 per cent, and Natwest and Lloyds down 5 per cent – wiping £50billion off the combined value of the FTSE 100 firms.
‘Firms could have been wiped out’
There are fears others may suffer contagion. The Government brokers a deal to protect British customers. The world holds its breath. Sound familiar? There is no indication so far that the collapse of Silicon Valley Bank will mirror the 2008 crash but the uncertainty is troubling. Chancellor Jeremy Hunt hopes it will not overshadow tomorrow’s Budget, but yesterday the FTSE 100 took a heavy tumble. After Covid, Ukraine and the Truss crisis, is Britain prepared for another economic shock?