HSBC UK, a ring-fenced subsidiary of HSBC, has acquired Silicon Valley Bank UK for £1 ($1.21), according to its latest filing.
In a statement from the Treasury, the Bank of England is monitoring the transaction in consultation with the British Treasury to safeguard the deposits of Silicon Valley Bank UK customers.
HSBC Says Surprise SVB UK Buyout ‘Makes Excellent Strategic Sense’
According to the filingon March 10, Silicon Valley Bank UK held loans totaling approximately $6.6 billion and deposits of approximately $8.1 billion.
“This acquisition makes excellent strategic sense for our business in the UK,” said Noel Quinn, CEO of HSBC Group.
“It strengthens our commercial banking franchise and increases our ability to serve innovative and fast-growing companies, including in the technology and science sectors, in the UK and internationally.”
British Finance Minister Jeremy Hunt believes that the agreement ensures the safety of customers’ deposits, so that they can continue banking normally, without financial help from taxpayers.
Image: Bobby Caina Calvan/AP
The Race For Acquisition
The HSBC acquisition news follows The Bank of London’s bid to rescue SVB UK.
Anthony Watson, Group Chief Executive and Founder of TBOL, has underlined the preservation of SVB’s services.
“Silicon Valley Bank cannot fail because of the important communities it serves,” Watson said.
At Standard Evening It is also reported that the British government is interested in Barclays owning the British unit of the failed bank.
Reuters too reported that other British banking institutions, including SoftBank-owned OakNorth Bank, are considering similar measures.
Abu Dhabi Investment Company ADQ is also interested in SVB’s arm.
Washington Mutual Comparisons
The collapse of Silicon Valley Bank has drawn investors comparisons to the collapse of Washington Mutual in 2008.
It is one of the largest savings and loan associations in the United States and has had significant implications for the US economy and the global financial system over the years.
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Failure of Washington Mutual This was caused by the collapse of the US housing market and the subprime mortgage crisis.
The bank has invested heavily in risky mortgage-backed securities and made loans to high-risk borrowers who were unable to repay their loans.
As a result of Washington Mutual’s collapse, the US government had to step in and take control of the bank’s assets.
This bailout cost the Federal Deposit Insurance Corporation (FDIC) approximately $2.2 billion, making it the largest bank failure in US history at the time.
-Featured image from REUTERS/Brendan McDermid