HSBC to Rescue Silicon Valley Bank UK from Insolvency in Eleventh-Hour Deal

In a stunning eleventh-hour development, HSBC Holdings has taken the initiative to rescue Silicon Valley Bank UK (SVBUK) from the brink of insolvency.

This Deal Protects Depositors’ Money and Averts Collapse of Technology-Focused Lender

This deal will protect depositors’ money and will, importantly, avert the technology-focused lender’s collapse.

According to Sky News, the FTSE-100 banking behemoth had been considering purchasing SVBUK as a potential “white knight” bidder since Sunday evening. This came as the UK government and regulators scrambled to prevent the potential fallout of the lender’s demise from causing widespread damage throughout the country’s tech sector.

The emergency sale process, which was overseen by Rothschild, was triggered by the collapse of SVB’s American parent into government ownership last week. On Monday morning, HSBC was reportedly preparing to announce the deal’s conclusion alongside the government.

Bank of England Confirms Safe Deposits Under HSBC Ownership

The Bank of England is expected to announce that all depositors’ money is safe as part of the rescue deal, and the bank will continue to operate normally under HSBC Bank UK plc’s ownership.

JP Morgan and other major banks in the UK were also reportedly approached to consider a bid, while smaller peers including Oaknorth Bank and The Bank of London submitted rescue offers on Sunday.

HSBC’s UK Exposure Boosted by SVBUK Acquisition

Sky News learned that the rescue deal would not be material to HSBC’s global balance sheet but would increase its exposure to corporate clients in the tech and biotech sectors within its home market of the UK.

In a statement released on Sunday, the Treasury indicated that the government was exploring funding solutions to help hundreds of SVB UK clients meet their cashflow obligations. The statement acknowledged the UK’s world-leading tech sector and dynamic start-up ecosystem, emphasising the importance of SVB to its customers.

SVBUK Collapse Could Impact UK Tech Ecosystem, Warns Government

“The government recognises that, given the importance of Silicon Valley Bank to its customers, its failure could have a significant impact on the liquidity of the tech ecosystem,” the statement read.

The implosion of SVB’s US-listed parent company, which is now under government control, represents one of the most significant global banking collapses since the financial crisis of 2008. UK depositors stand to receive up to £85,000 as part of the resolution of the British arm of SVB, causing concerns about the fate of substantial amounts of funding in the start-up community.

Early-Stage Companies Warn of Tech Sector’s Existential Threat

In response, dozens of early-stage companies wrote to Jeremy Hunt, the chancellor, to warn of an “existential threat to the UK tech sector” if SVB UK collapsed. The letter emphasised that the majority of the most exciting and dynamic tech businesses bank with SVB and have no or limited diversity in where their deposits are held.

“The impact of this is far greater than our individual businesses,” the letter read. “The Bank of England’s assessment that SVB going into administration would have limited impact on the UK economy displays a dangerous lack of understanding of the sector and the role it plays in the wider economy, both today and in the future.”

The founders warned that the collapse of SVB UK would “cripple the sector and set the ecosystem back 20 years,” potentially sending many businesses into involuntary liquidation overnight.