HSBC has bought the near-insolvent Silicon Valley Bank (SVB) UK for £1 ($1.21) to secure over $8bn of holdings and around 3,000 accounts across the UK technology industry.
After spending the weekend in talks with SVB UK and the Bank of England and explaining the situation on TV, Jeremy Hunt, UK Chancellor of the Exchequer, declared in a Gov.UK statement:
“Today, the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customer deposits are protected and can bank as normal, with no taxpayer support. I am pleased we have reached a resolution in such short order.”
He added:
“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them.”
Hunt confirmed the buyout’s importance: “The UK’s tech sector is world-leading and hugely important to the British economy, supporting hundreds of thousands of jobs. I said yesterday that we would look after our tech sector.”
Before the news of the HSBC’s acquisition of SVB UK, Eric Yuan, CEO of Zoom, reacted on LinkedIn and posted: “Silicon Valley Bank has supported many of the world’s greatest technologies over the past 40 years. Fueling overall economic growth and jobs that stretch well past the Silicon Valley, SVB’s business continuity is critically important not only for the tech industry but all industries.” He added:
“I am an advocate of an outcome that allows for their operations not only to continue, but thrive in support of generations to come!”
Open Letter to the UK Government
The deal follows an open letter by the sector to the British government asking for financial help after the US’s Silicon Valley Bank Financial Group became insolvent.
Directed to the UK Chancellor Jeremy Hunt at the Treasury Department, the open letter included around 210 firms and startups, featured 140 CEOs and founders and listed well-known brands and companies in the UC&C space with those connected to it.
The letter stated that it represented 10,000 people and had raised venture funding of £3.5 billion. Among the names who signed in a request for action were Slack Technologies, Zoom Video Communications, Stripe, GitHub, DocuSign, Atlassian, Coursera, Eventbrite, Fitbit, GoPro, SurveyMonkey Twilio, Box, Asana, Cloudera, Dropbox and Uber.
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UK Government Response to the SVB Crisis
Hunt responded and promised help, working through the weekend with Andrew Bailey, Governor of the Bank of England and Prime Minister Rishi Sunak. Fears have mounted that the bank’s crash could set off a run on other banks and a global downturn.
Speaking on Sky News on Sunday, Hunt warned: “There is a serious risk to our technology and life sciences sectors, many of whom bank with Silicon Valley Bank, which most people won’t of heard of, but it happens to look after the money of some of our most promising and exciting businesses.”
After saying that he and others were “working at pace on a solution,” the UK government and the tech industry may have found it.
Noel Quinn, Chief Executive of HSBC, said customers could bank as usual and explained the purchase: “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.”
Financial Situation Misjudged
According to the SVB UK wing of the SVB Financial Group, it had autonomy over its accounts and is ring-fenced as an independent subsidiary. However, it still applied for $1.8 billion of liquidity on Sunday.
The tech firms listed in the open letter financially tied to SVB pressed for action and made its position on its confidence in the Bank of England underestimating the situation; it stated:
“The Bank of England’s assessment that SVB going into insolvency would have limited impact on the UK economy displays a dangerous lack of understanding of the sector and its role in the wider economy, both today and in the future.”
Other renowned tech companies in the letter included Coinbase, Robinhood, Plaid Palantir Technologies, Tesla Square, Airbnb, DoorDash, Houzz, Kabbage, MongoDB, Nutanix, PagerDuty, Zillow, Okta, Robinhood, Docker, MongoDB, Nutanix, Postmates, Rubrik, Snowflake and Wish.
Many SVB-affected tech companies had their accounts frozen. If continued today, it would immediately affect cash flow and wages, creating a major crisis for the industry and triggering financial problems for affiliated or partnered banks and businesses.
The tech industry’s letter explained:
“The technology sector is a highly interconnected ecosystem that has developed over multiple decades. The level of impact the loss of deposits would have would cripple the industry and set the ecosystem back 20 years.
The letter signed off saying: “This crisis will start on Monday, and we call on you to prevent it now.”
Regarding alarm that SVB’s failure could spread to other banks, Hunt prefaced the interview on Sunday and said: “The Governor of the Bank of England has made it very clear there is no systemic risk to our financial system — so people should be reassured on that basis.”
Depositors Money Safe in UK and US
Today the Bank of England stated: “The Bank and HM Treasury can confirm that all depositors’ money with SVB UK is safe and secure due to this transaction. SVB UK’s business will continue to be operated normally. All services will continue operating normally, and customers should not notice any changes.”
Meanwhile, stateside, the Department of the Treasury, Federal Reserve, and FDIC issued a joint statement declaring it would be taking decisive measures to avert a crisis and reassured firms with SVB accounts:
“Depositors will have access to their money starting Monday, March 13. The taxpayer will bear no losses associated with the resolution of Silicon Valley Bank.”
The announcement, posted on the U.S. Department of the Treasury‘s website, concluded: “This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”
