HSBC on Monday averted a crisis in Britain’s tech sector by rescuing Silicon Valley Bank’s UK arm, a dramatic fire sale concluded after all-night talks led by Prime Minister Rishi Sunak and the Bank of England.
HSBC emerged overnight as the leading white-knight bidder for SVB UK, paying a symbolic £1 for the bank. HSBC chief executive Noel Quinn said the acquisition made “excellent strategic sense” and would complete immediately.
European stocks fell in early trading on Monday but US futures rose as investors digested regulators’ actions over the weekend. The US government set out emergency measures to protect the banking system after the collapse of California-based SVB on Friday, the biggest US bank failure since 2008.
Shares in First Republic, a San Francisco-based bank, fell 55 per cent in pre-market New York trading.
A sale of SVB UK was the preferred choice of chancellor Jeremy Hunt, avoiding a big government intervention to protect depositors.
Hunt wrote on Twitter on Monday: “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 tech sector, and we have worked urgently to deliver that promise.”
The BoE, which had warned it planned to put the UK bank into insolvency after the collapse of its parent, said action was taken “to stabilise SVB UK, ensuring the continuity of banking services, minimising disruption to the UK technology sector and supporting confidence in the financial system”.
Hours after US regulators closed a second bank, Signature Bank, the BoE stressed: “No other UK banks are directly materially affected by these actions, or by the resolution of SVB UK’s US parent bank. The wider UK banking system remains safe, sound, and well capitalised.”
The overnight mission to rescue SVB’s UK arm was led by Sunak, Hunt and City minister Andrew Griffith, while Andrew Bailey, BoE governor, and Sam Woods of the Prudential Regulation Authority were also involved.
One person briefed on the haggling over the future of SVB UK said it was a “fully competitive” process with multiple parties interested in taking over the stricken bank.
Sunak, who is in California for a defence summit with leaders of the US and Australia, was said to have been “very hands-on” overnight.
HSBC’s Quinn added that the deal “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally”.
SVB UK will become part of HSBC’s ringfenced UK business, which has 14mn customers and 18,500 staff. The business, which traces its roots back to the Midlands Bank, is based in Birmingham.
HSBC said a final calculation of the gain from the acquisition would be provided in due course and that it would be funded from its existing resources.
Hunt said on Sunday there was “a serious risk” to tech and life sciences companies that used SVB’s UK bank, with senior founders warning of “carnage” if they were unable to pay wages and bills in the coming week.
The government spent the weekend racing to try to sell SVB UK, which has £6.7bn of deposits and £5.5bn of loans, and put together a back-up plan to support companies that have deposits trapped in the lender. US regulators on Sunday evening said SVB’s American depositors would have access to all of their money on Monday.
Several people familiar with the UK government’s attempts to broker a sale said a Middle Eastern buyer was one of the leading bidders, in a move reminiscent of rescues after the 2008 financial crisis.
British banks OakNorth and the 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 the financial insurance scheme.
Asked if he would guarantee 100 per cent of deposits, Hunt told the BBC’s Laura Kuenssberg: “We want to find a way that minimises — or if we possibly can — avoids all losses to these incredibly promising companies.”
Sunak repeated the BoE’s assertion that the collapse of SVB’s UK bank did not present “a systemic contagion risk”.
Additional reporting by Stephen Morris, Ivan Levingston, Michael O’Dwyer, Emma Dunkley and Anjli Raval