HSBC UK has announced its acquisition of Silicon Valley Bank UK for a nominal amount of £1. The transaction followed a weekend of intense negotiations among the U.K. government, regulators, and various potential buyers after the U.K. subsidiary of the troubled U.S. entity entered insolvency procedures on Friday.
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This acquisition will provide significant relief to the U.K. technology sector, which was particularly vulnerable to the collapse of both SVB and its U.K. arm. The rapid completion of the deal will be perceived as a sign of the government's endorsement of the technology industry and its trust in the financial system as a whole.
According to a statement released by HSBC, the transaction has been completed immediately, and the acquisition will be financed using existing resources. The bank further stated:
‘As at 10 March 2023, SVB UK had loans of around £5.5 billion and deposits of around £6.7 billion. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88 million. SVB UK’s tangible equity is expected to be around £1.4 billion. Final calculation of the gain arising from the acquisition will be provided in due course.’
The Bank of England has assured the safety of all depositors' funds with SVB UK, as the acquisition guarantees the continuity of banking services. As a result, SVB UK will not be subjected to insolvency proceedings.
U.K. Chancellor Jeremy Hunt confirmed that the government, in collaboration with the Bank of England, has facilitated a private sale of Silicon Valley Bank UK to HSBC. He further stated that depositors' funds will be protected without the need for any financial assistance from taxpayers.
The Bank of England has confirmed that Silicon Valley Bank UK's business operations will continue as usual under the ownership of HSBC. All services will remain unchanged, and customers should not anticipate any disruptions to their banking experience. Customers are encouraged to contact SVB UK through the regular communication channels, and loan repayments should continue to be made to SVB UK as usual. SVB UK's employees will remain employed by the bank, and the institution will retain its authorization from the PRA/FCA.
The Bank's statement also supersedes its previous declaration on March 10 that, in the absence of any significant additional information, it intended to seek a court order to place SVBUK into a Bank Insolvency Procedure. The emergence of a credible purchaser for SVBUK has led the Bank to exercise its resolution powers for stabilizing failing banks, rendering the previous statement moot.
The Bank of England also confirmed that no other U.K. banks will be materially affected by these actions or the resolution of SVBUK's U.S. parent bank, and that the wider U.K. banking system remains secure, robust, and adequately capitalized.
Noel Quinn, the CEO of HSBC Group, has expressed his enthusiasm for the acquisition of Silicon Valley Bank UK and extended a warm welcome to its customers in a statement. He affirmed that the deal aligns with the bank's strategic vision for the U.K. market and will reinforce its commercial banking capabilities, particularly in serving innovative and rapidly growing firms, including those in the technology and life science sectors, both in the U.K. and internationally.
Quinn further assured SVB UK customers that they could continue to bank with the same level of convenience and safety they are accustomed to, with the added assurance that their deposits are backed by the strength and security of HSBC. The CEO also expressed his eagerness to collaborate with SVB UK colleagues and strengthen the bank's position in the U.K. financial sector.
Dom Hallas, the Executive Director of Coadec, a non-profit organization that advocates for the interests of tech startups, has lauded the efforts of the U.K. government in facilitating the acquisition. He acknowledged the significant role played by various government bodies, including HM Treasury and the civil servants who worked tirelessly to secure the deal. Hallas also highlighted the importance of the government's intervention in protecting hundreds of the U.K.'s most innovative companies.
The sale of SVB UK to HSBC has spared the U.K. from the need to provide system-wide support to safeguard depositors' funds, a measure that the U.S. Treasury was forced to introduce in similar circumstances. Additionally, the acquisition has reduced the likelihood of the so-called 'moral hazard' risk, which occurs when failed banks and depositors expect to be bailed out by the government.
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