HSBC on Friday avoided a crisis in the UK technology sector by saving the UK arm of Silicon Valley Bank, a dramatic fire sale completed after all-night talks led by Rishi Sunak and the Bank of England.
HSBC emerged last night as the main white knight bidder for SVB UK, paying a symbolic £1 for the bank. Chief executive Noel Quinn took part in talks with British Prime Minister Sunak, who is in the US for defense talks.
A sale of stricken banks was the preferred choice of Chancellor Jeremy Hunt since it would be so that the British government should intervene widely to protect depositors.
Hunt wrote on Twitter at 7am: “This morning the government and the Bank of England facilitated the private sale of Silicon Valley Bank UK to HSBC. Deposits will be protected, without taxpayer support.
“I said yesterday that we will take care of the technology sector, and we have worked hard to deliver on that promise.”
The BoE, which has warned it plans to make the UK bank into insolvency after the collapse of its parent, said action was being taken “to stabilize SVB UK, ensure the continuity of banking services, reduce disruption to the UK technology sector and support confidence in the financial system”.
Hours after the US regulator shut down a second bank, Signature Bank, the BoE stressed that: “No other UK bank has been directly affected by this action, or by the resolution of US parent SVB UK. The wider UK banking system remains safe, sound, and good capitalization.
The collapse of California-based SVB, following a bank run triggered by investor concerns about its balance sheet, was the biggest US bank failure since 2008.
The extraordinary overnight mission to save SVB’s UK arm was led by Sunak, Hunt and City Minister Andrew Griffith, while Andrew Bailey, governor of the BoE, and Sam Woods of the Prudential Regulation Authority also took part.
One person briefed on the negotiations over the future of SVB UK said the process was “intensely competitive” with various parties interested in taking over the embattled bank.
Sunak, in California for a defense summit with US and Australian leaders, is said to have been “very hands-on” overnight.
HSBC’s Quinn said, “This acquisition makes great strategic sense for our business in the UK. It strengthens our commercial banking franchise and increases our ability to serve innovative and fast-growing companies, including those in the technology and science sectors, in the UK and internationally.
Hunt said on Sunday there was a “serious risk” to technology and life sciences companies using UK bank SVB, with senior founders warning of “carnage” if they were unable to pay wages and bills in the coming weeks.
The government spent the weekend racing to try to sell SVB UK, which has £6.7bn of deposits and £5.5bn of loans, and set up a back-up plan to support companies with deposits trapped by lenders. US regulators on Sunday evening said SVB’s American depositors would have access to all their money on Monday.
Several people familiar with the British government’s efforts to broker a sale said a Middle Eastern buyer was one of the leading bidders, in a move that resembled a bailout after the 2008 financial crisis.
British banks OakNorth and Bank of London also submitted bids, with the latter leading a consortium that includes private equity groups, according to people familiar with the matter.
SVB UK has 3,300 UK clients, including start-ups, venture-backed companies and funds, according to people familiar with the bank, although many have deposits under the £85,000 threshold covered by financial insurance schemes.
Asked if he would guarantee 100 percent of the deposit, Hunt told the BBC’s Laura Kuenssberg: “We want to find a way that minimizes – or if possible – avoids all losses for this incredible company.”
Sunak repeated the BoE’s claim that the collapse of British bank SVB did not present a “risk of systemic contagion”.
Additional reporting by Stephen Morris, Ivan Levingston, Michael O’Dwyer, Emma Dunkley and Anjli Raval