High street lender HSBC has acquired Silicon Valley Bank UK for £1 in an eleventh-hour deal that will protect deposits for thousands of startups across the UK.
The government said the deal was facilitated by the Bank of England in consultation with the Treasury. No taxpayer money is involved, the Treasury said.
HSBC’s takeover of Silicon Valley Bank UK comes after the government held a weekend of crisis talks as it raced to prevent startups from across the country from going under. On Friday, California-based Silicon Valley Bank collapsed in the largest bank failure since 2008 after it could not meet withdrawal demands.
Its UK subsidiary, reportedly used by more than 3,000 startups, faced insolvency on Monday without a buyer or government intervention.
Noel Quinn, HSBC Group CEO, said: “This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.”
London-headquartered HSBC said in a statement that SVB UK had loans of around £5.5bn and deposits of around £6.7bn as of 10 March. SVB UK’s “tangible equity” is expected to be around £1.4bn, HSBC added.
Quinn added that SVB UK customers can “continue to bank as usual”.
The Bank of England confirmed that “all depositors’ money with SVB UK is safe and secure as a result of this transaction”. It added that customers should continue to bank with SVB UK as normal and that SVB UK staff continue to be employed by SVB UK.
Tech sector lifeline
“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” said Chancellor Jeremy Hunt. “I said yesterday 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.”
Startups had faced a cashflow crunch on Monday after many were unable to access some or all of their funds with Silicon Valley Bank UK. Bosses had feared they would be unable to make payroll or pay invoices. An open letter signed by more than 200 startups called it an “existential threat to the UK tech sector”.
Dom Hallas, executive director of the Coalition for a Digital Economy (Coadec) and who spearheaded the tech industry’s response, said the government’s actions “have saved hundreds of the UK’s most innovative companies today”.
Over the weekend a number of banks were in discussions to take over SVB UK, including Lloyds, Barclays and OakNorth. On Sunday evening, The Bank of London, a two-year-old clearing bank, formally submitted a bid.
In a statement, The Bank of London said it was “great news that a speedy solution has been found for Silicon Valley Bank UK” but added that “for many, it will be seen as a missed opportunity to support competition and innovation”.
