HSBC acquires Silicon Valley Bank UK as a bailout to avoid disruptions in the tech sector.

HSBC It bought the UK arm of bankrupt US lender Silicon Valley Bank in a last-minute bailout deal to avert a crisis in the UK’s tech sector.

The sale for a notional value of £1 was agreed after an all-night discussion between the two companies. government The Bank of England has announced a decision to reduce the size of Silicon Valley Bank UK (SVB UK) amid fears the tech sector has been thrown into turmoil by the collapse of California-based lender Silicon Valley Bank UK (SVB UK). trying to secure a sale.

President Jeremy Hunt After the Silicon Valley Bank collapsed last Friday, it warned that some of Britain’s major tech companies could have been “wiped out” if no solutions were found.

However, he confirmed that the sale to HSBC protected all customer deposits and did not involve taxpayer cash.

Customers and businesses that have been unable to withdraw money since Friday’s collapse can now access cash as normal, he added.

The U.S. government also stepped in to protect all customer deposits after the failure of the Silicon Valley Bank, the largest bank failure since the 2008 financial crisis, to prevent a potential wider banking crisis. .

It came as spreads began to take hold, and regulators announced that a New York-based signatory bank had also failed and was foreclosed on Sunday.

But financial markets were skeptical that the contagion had been contained as the FTSE 100 index fell another nearly 2% on Monday despite the coordinated actions.

Banking and financial stocks plunged further after their plunge on Friday.

Mr Hunt told the broadcaster there was “no systemic risk to the UK’s financial stability” from the failure of SVB UK, but if no way forward was found, a UK company could be called on Monday morning. warned of the dangers faced.

he said:

“They need to pay their employees and as of 8am this morning they were literally afraid they would lose access to their bank accounts.

“So some of the most important companies, the most strategic companies could be wiped out, and it was facing a very dangerous situation.”

Prime Minister Rishi Sunak is understood to have participated in the weekend’s relief talks alongside Mr Hunt and Bank of England Governor Andrew Bailey.

SVB specializes in lending to emerging technology companies and is a key banking partner to venture capital firms with over 3,000 clients in the UK.

SVB UK had around £6.7bn in deposits and around £5.5bn in loans as of last Friday, according to the Bank of England, with a balance sheet of £8.8bn.

However, the bank said, “The magnitude of the deterioration in liquidity and confidence means, in the view of the bank and prudential regulators, that the position is irrecoverable.”

So it stepped in to exercise its resolution powers to stabilize failed banks brought in after the financial crisis.

The bank stressed that all SVB UK services will continue as normal after the transaction and all staff will continue to be employed by the bank.

The wider UK banking system is “safe, sound and well capitalized”, the World Bank added.

SVB UK customers can safely continue banking as usual, knowing that their deposits are backed by HSBC’s strength, safety and security.

HSBC Group Chief Executive Officer Noel Quinn

HSBC is also working to reassure SVB UK customers, saying the deal is “highly strategic for our business in the UK”.

Group CEO Noel Quinn “SVB UK customers can safely continue banking as usual, knowing that their deposits are backed by HSBC’s strength, safety and security.”

SVB went bankrupt and had its assets seized by US regulators on Friday. This comes just two days after leading cryptocurrency lender Silvergate Capital announced last Wednesday that it would scale back operations and liquidate its banks.

The Bank of England then said it intended to order its UK subsidiary into bankruptcy from Sunday night, sparking a scramble to secure a bailout deal before the deadline.

UK clearing bank Bank of London was one of the companies involved in early-stage negotiations and tender for SVB UK’s bailout.

He criticized the sale to HSBC as a “missed opportunity”.

Bank of London said:

However, the British Private Equity & Venture Capital Association (BVCA), the industry body representing venture capital investors, has made thousands of investments in UK technology and science companies, many of which are accounted for in SVB UK. said the deal was “welcome news.” .

BVCA Executive Director Michael Moore said: “An orderly transition and access to cash frozen over the weekend should return confidence to markets and affected businesses.”