HSBC is buying the UK branch of collapsed lender Silicon Valley Bank for £1 in a private sale facilitated by the government and the Bank of England.
The Bank of England announced on Friday that the Silicon Valley bank was entering UK bankruptcy, following the collapse of its parent company in the United States – the biggest bank failure since the 2008 financial crisis.
The US government moved to avert a potential banking crisis following the historic failure of a Silicon Valley bank that secured all deposits, amid fears that the Santa Clara, California-based bank’s failings could spread.
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On Monday, HSBC announced that it had acquired the bank’s UK subsidiary for just £1.
Chancellor Jeremy Hunt confirmed the news, saying the deal – facilitated by the government and the Bank of England – would ensure deposits are safe and involve no taxpayer support.
He said: “This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC.
“Deposits will be protected, with no taxpayer support. I said yesterday that we would look after our technology sector, and we have acted immediately to deliver on that promise.”
The Bank of England has said that all deposits are “safe and secure” after the sale.
Their statement said: “In consultation with the Bank of England (the Bank), the Prudential Regulation Authority (PRA), HM Treasury (HMT) and the Financial Conduct Authority (FCA), the decision has been taken to sell Silicon Valley Bank UK Limited. ‘SVBUK’), for HSBC UK Bank plc (HSBC), the UK subsidiary of US Bank.
“HSBC is authorized and supervised by the PRA and the FCA.”
Mr Hunt added: “The UK’s tech sector is truly world-leading and very important to the British economy, supporting hundreds of thousands of jobs.
“I said yesterday that we would look after our technology sector, and we have acted urgently to deliver on that promise and find a solution that will provide confidence to SVB UK customers.
“Today the Government and the Bank of England have facilitated the private sale of Silicon Valley Bank UK; This ensures that customer deposits are safe and can bank normally without taxpayer backing. I am glad that we have reached a resolution in such a short time.
“HSBC is Europe’s largest bank, and customers of SVB UK should feel confident in the strength, safety and security it brings to them.”
A statement from HSBC chief executive Noel Quinn said the acquisition makes “excellent strategic sense”.
“We welcome SVB UK customers to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can always bank as safe as ever with the knowledge that their deposits are backed by the strength, safety and security of HSBC. We warmly welcome SVB UK’s colleagues at HSBC, we are excited to start working with them,” Mr Quinn said in a statement.
Bank of London – a UK clearing bank that also submitted a rescue bid for SVB UK – criticized the sale to HSBC as a “missed opportunity”.
It said: “For many, this will be seen as a missed opportunity to support competition and innovation.
“It cannot be right that once again the legacy banks who have provided UK entrepreneurs with poor service for many years are benefiting from an already dominant position.
“The UK needs better. For our part, we at Bank of London stand ready to serve the UK’s entrepreneurial community.”
Tonbridge MP and former Tory leadership hopeful Tom Tugendhat tweeted that it represented a “great deal”.
He wrote: “[This is] A Big Deal for GB Tech – Avoiding Disruption; GB Taxpayers – it costs us nothing and supports ideas, jobs and future taxes; And the shareholders of HSBC – it opens up an important sector of the economy for them. Well done @hmtreasury.”
The near-financial crisis that US regulators had to intervene to prevent panic gripped left Asian markets after the start of trading on Monday.
Japan’s benchmark Nikkei 225 slipped nearly 1.2 per cent in morning trade. Australia’s S&P/ASX 200 closed down 0.6 percent at 7,104.30.
South Korea’s Kospi, however, was little changed.
In an effort to boost confidence in the banking system, the Treasury Department, the Federal Reserve and the FDIC said Sunday that all customers of Silicon Valley Bank will be safe and able to access their money.
He also announced steps that are aimed at protecting the bank’s customers and preventing additional bank runs.
“This step will ensure that the US banking system continues to play its important role of protecting deposits and providing households and businesses with access to credit, thereby fostering strong and sustainable economic growth,” the agencies said in a joint statement.
Under the plan, depositors at Silicon Valley Bank and Signature Bank, including those whose holdings exceed the insurance limit of US$250,000, will be able to access their money on Monday.
In a separate move, the Federal Reserve late Sunday announced a detailed emergency lending program aimed at preventing a wave of bank runs that would threaten the stability of the banking system and the economy as a whole.
Fed officials described the program as similar to what central banks have done for decades: let the banking system lend freely so that customers have confidence that they can access their accounts whenever they need them.
The lending facility would allow banks that need to raise cash to pay depositors to borrow that money from the Fed, instead of selling Treasuries and other securities to raise the money.
The Silicon Valley bank was forced to dump some of its coffers in losses in order to fund its customers’ withdrawals.
Under the Fed’s new program, banks can post those securities as collateral and borrow from the emergency facility.
The Treasury has set aside $25 billion to cover any losses under the Fed’s emergency lending facility. Fed officials said, however, that they do not expect they will have to use any of that money, noting that the risk of default in securities posted as collateral is very low.
Analysts said the Fed’s program should be enough to calm financial markets on Monday.
“Monday will certainly be a stressful day for many in the regional banking sector, but today’s actions dramatically reduce the risk of further contagion,” economists at Jefferies, an investment bank, said in a research note.
Although Sunday’s moves marked the most sweeping government intervention in the banking system since the 2008 financial crisis, its actions are relatively limited compared to 15 years ago.
The two failed banks themselves have not been saved, and taxpayer money has not been provided to the banks.
President Joe Biden said Sunday evening that he would talk about the bank situation on Monday when he flew back to Washington on Air Force One.
In a statement, Mr. Biden also said that he is “committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of big banks so that we will never again be in this mess.” Don’t be in position”.
Regulators rushed to shut down Silicon Valley Bank, a financial institution with more than US$200 billion in assets, on Friday after it experienced a traditional run on the bank where depositors rush to withdraw their funds in one go. Ran for
It is the second largest bank failure in US history, behind only the 2008 failure of Washington Mutual.
Some prominent Silicon Valley executives feared that if Washington could not save the failing bank, customers would flock to other financial institutions in the coming days.
Stock prices in other banks that cater to technology companies, including First Republic Bank and PacWest Bank, have tumbled over the past few days.
Among the bank’s clients are companies in the California wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups dedicated to combating climate change.