HSBC purchased the Silicon Valley Bank’s UK arm for a symbolic one pound to rescue it from the biggest bank collapse. The bank is a top lender for tech firms now struggling with roiling markets due to a financial crash. Generally, the deal concluded a frantic weekend talk between prospective buyers, regulators, and the government. It occurred after the US authorities sought to shore up deposits and stem a broader contagion in the SIVB.O parent bank.
Yet, a global stocks rout persisted through the week, with EU banks falling up to 6% on Monday. The fall marked the worst two-day collapse since Russia invaded Ukraine in 2022. Besides, HSBC shares dropped by about 3.8%. Tech firms, regulators, and UK government ministers all welcome the SVB UK rescue deal, saying it will stabilize the situation for customers.
Jeremy Hunt (the UK Finance Minister) explained that HSBC is the largest bank in Europe. Thus, he reassured customers of the bank’s security, safety, and strength. Hunt said that the deal rescued some of the most strategic and essential companies from a collapse that would otherwise hurt the economy. Meanwhile, the Bank of England backed the sale to minimize fallout for UK tech firms and underpin confidence in the financial system. The bank clarified that the banking system was safe and deposits remained secure.
Silicon Valley Bank of UK ring-fenced from the United States group and omitted the liabilities and assets of the parent bank from its transactions. On the other hand, HSBC CEO said the acquisition was a strategic move for UK firms. The takeover closed quickly since SVB UK has about 6.7 billion pounds in deposits and around 5.5 billion pounds in loans. Overall, the total balance sheet size was about 8.8 billion pounds. Britain differs from the US since it did not announce broader liquidity plans for its banking system.
In any case, several British listed firms issued statements about the SVB UK exposure earlier in the week. They intended to reassure or warn investors before the bank announced the rescue deal. Companies like Naked Wines, card maker MOONS.L and THG issued statements to clarify that a financial crash would not affect their operations. Others, like DXRX.L, said that the conditions would impact their liquidity.
Industry groups representing small firms agreed with the takeover deal to shield them from a financial crash. They included biotech groups comprising about 40% of its firms banking with Silicon Valley Bank UK. The biotech sector had predicted economic turmoil if there was no quick resolution. Other potential buyers for the bank include Oak North Bank and the Bank of London.
