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 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. Chief executive Noel Quinn was involved in the frantic negotiations with UK prime minister Sunak, who is in the US for defence talks.
A sale of the stricken bank was the preferred choice of chancellor Jeremy Hunt since it would avoid the UK government having to make a big intervention to protect depositors.
Hunt wrote on Twitter at 7am: “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 that: “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 collapse of California-based SVB, following a bank run triggered by investor concerns about its balance sheet, is the biggest US bank failure since 2008.
The extraordinary 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, 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 said: “This acquisition makes excellent strategic sense for our business in the UK. It 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.”
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 that 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