The British branch of the “Silicon Valley” bank (SVB), which collapsed this weekend in the USA, will be fully acquired by the HSBC bank, in a deal on which the representatives of the British Treasury, together with the representatives of the Central Bank and in coordination with the Prime Minister Rishi Sunak, worked over the last day. The purchase will be made for Only one pound, but the banking giant will be the guarantor of all the deposits and loans of the British branch of SVB.
The British authorities clarified in the last few hours that “competitive negotiations” were conducted completely during the last day, in which “many parties were interested in purchasing the activity”. The authorities tried to complete the process before the opening of trading at ten in the morning (Israel time) in the UK.
“This morning, the British government and the Bank of England allowed the private sale of Silicon Valley Bank UK to HSBC. Deposits will be protected, with no support from UK taxpayers. I said yesterday that we would take care of our technology sector, and we have worked hard to keep that promise,” wrote B” Twitter” British Chancellor of the Exchequer Jeremy Hunt.
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
– Jeremy Hunt (@Jeremy_Hunt) March 13, 2023
The British branch (SVB UK) is considered a completely independent legal and banking entity. The British government declared it insolvent on Friday night, after its American parent bank was taken over by the Federal Deposit Insurance Corporation (FDIC).
The British were faced with the same dilemma as the American authorities: whether to bail out the bank and how to do it, or allow it to collapse and offer quick loans and credits to British start-up companies that held funds in it, and relied on its banking activities.
Hundreds of companies with £3 billion in deposits
According to HSBC’s announcement today (Tuesday), the bank had deposits worth 6.7 billion pounds and loans worth 5.5 billion pounds. Most of them were managed for hundreds of British start-up companies, but also from other European countries, such as Germany and Scandinavia. The website TechCrunch estimated at the end of the week that about 30% of the companies active in the British ecosystem have an account there, and that 10% of the companies “may run into cash flow difficulties” if a quick solution is not found. Nearly 200 managers from the sector sent a letter to the government on Sunday in which they request its intervention in solving the crisis. The official number of accounts in the British branch is more than 3,300, according to reports.
Now the government has found a different solution than the one formulated in the US. According to a report in the “Financial Times”, as early as eight in the morning (Israel time) it was decided that HSBC would be responsible for the entire operation of the British branch. The bank’s CEO Noel Quinn was involved in the marathon of talks and the pricing that took place through talks Conference in the last day.
According to the report, a sale was the preferred solution by British Chancellor of the Exchequer Jeremy Hunt, because it would minimize government intervention in the process. Prime Minister Rishi Sunak participated in the process and consultations from California, where he is on an official visit. Bank of London and OakNorth also submitted bids, as did an unnamed “Middle Eastern bank.”
“The acquisition will strengthen our commercial banking sector, and increase our ability to serve innovative and fast-growing companies, in the technology and life sciences sectors, in the UK and around the world,” said HSBC Chief Executive Kevin.