SVB UK saved from collapse with £1 deal
HSBC made a notable announcement on Monday regarding their acquisition of Silicon Valley Bank's U.K. branch. The U.S. tech startup lender had recently declared bankruptcy, and after prolonged negotiations that lasted through the night, the deal was ultimately agreed upon. HSBC UK Bank, the bank's ring-fenced subsidiary, confirmed the acquisition of SVB U.K. for £1 ($1.21). It should be noted that the deal does not include the assets and liabilities of SVB U.K.'s parent company.
This latest development is of great significance to HSBC as it represents a strategic expansion of its operations in the U.K. financial market.
The CEO of HSBC Group, Noel Quinn, states that the deal "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 U.K. and internationally."
As per HSBC's announcement on Monday, SVB U.K. had loans totaling approximately £5.5 billion and deposits of around £6.7 billion as of Friday, alongside a pre-tax profit of £88 million in 2022. The tangible equity of SVB U.K. is expected to be approximately £1.4 billion, with the final gain calculation from the acquisition to be revealed at a later date.
According to a statement from the U.K. Treasury, the sale of SVB U.K. was organized by the Bank of England and the U.K. Treasury in order to safeguard the deposits of SVB U.K. clients. This agreement was praised by British Finance Minister Jeremy Hunt, who remarked that it "ensures customer deposits are protected and can bank as normal, with no taxpayer support."
Hunt disclosed on Sunday that the U.K. government and the Bank of England were collaborating to "avoid or minimize" any negative impacts arising from SVB U.K. Meanwhile, U.S. regulators authorized measures to assist depositors and financial institutions affiliated with SVB's parent company in the United States.
In addition, the U.S. Treasury Department has classified SVB and New York-based Signature Bank as systemic risks due to concerns about contagion, permitting both institutions to be wound up in a manner that safeguards depositors.
About the future of startups
After the collapse of its U.S. parent company last Friday, numerous bidders submitted proposals to purchase SVB U.K., with concerns raised about the fate of various British tech and life sciences startups. The Bank of London has announced that it has headed a consortium of private equity firms that has officially presented a proposition to the U.K. Treasury and the Prudential Regulation Authority at the Bank of England.
According to Bank of London CEO Anthony Watson, SVB is crucial to the community and "cannot be allowed to fail given the vital community it serves."
"This is a unique opportunity to ensure the U.K. has a more diversified banking sector whilst allowing continuity of service to SVB's U.K. client base. It would be deeply disappointing for this moment to lead to further consolidation of power among big banks," he added.
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