UK’s Silicon Valley Bank Sold for Just One Pound to HSBC

HSBC UK
Bank plc, the British subsidiary of the HSBC Holdings plc banking giant, has
announced the <a href=”https://www.financemagnates.com/terms/a/acquisition/” class=”terms__main-term” id=”3180494d-8751-4a02-9476-86dc1cd4d2e2″ target=”_blank”>acquisition</a> of the Silicon Valley Bank (<a href=”https://www.financemagnates.com/tag/silicon-valley-bank/” target=”_blank” rel=”follow”>SVB</a>) UK Limited, the local
part of a failed US financial institution, for a symbolic pound. In addition, the Financial Conduct Authority (FCA) has issued a statement on the SVB’s activities in the country.Silicon Valley Bank
CollapsesOn 10
March, US authorities ordered SVB to cease its operations, triggering a panic
spreading through the markets. Cryptocurrencies, among others, lost
dynamically, as many of the <a href=”https://www.financemagnates.com/tag/circle/” target=”_blank” rel=”follow”>leading digital asset companies</a> had significant
exposure to the bank, being its significant depositors.However, the
situation started to return to normal on Monday, with incoming information from
regulators suggesting that a repeat of the financial crisis that occurred in
2008 with the collapse of Lehman Brothers will be avoided.SVB’s
<a href=”https://www.financemagnates.com/terms/b/bankruptcy/” class=”terms__secondary-term” id=”41b3ef0d-d805-441d-8443-121890264e94″ target=”_blank”>bankruptcy</a> provided an opportunity for other players in better financial shape
to make lucrative acquisitions. HSBC <a href=”https://www.londonstockexchange.com/news-article/HSBA/hsbc-acquires-silicon-valley-bank-uk/15871682″ target=”_blank” rel=”nofollow”>officially announced</a> on 13 March that its
UK division was acquiring SVB’s UK division for £1.”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,” Noel Quinn, the CEO of HSBC
Group, commented.HSBC Takes Advantage and
Buys SVB UKAs of 10
March 2023, SVB UK boasts loans totaling roughly £5.5 billion, while deposits
come in at approximately £6.7 billion. For the financial year that ended on 31
December 2022, the company reported a pre-tax profit of £88 million. The
expected value of SVB UK’s tangible equity is around £1.4 billion. HSBC will
provide an update on the final calculation of the gain resulting from the
acquisition at a later time. It’s worth noting that the transaction excludes
the assets and liabilities of SVB UK’s parent companies, and it has been
completed immediately using existing resources to fund the acquisition.”We
welcome SVB UK’s customers to HSBC and look forward to helping them grow in the
UK and around the world. SVB UK customers can continue to bank as usual, safe
in the knowledge that their deposits are backed by the strength, safety and
security of HSBC. We warmly welcome SVB UK colleagues to HSBC, we are excited
to start working with them,” Quinn added.HSBC shares
on the London Stock Exchange (<a href=”https://www.financemagnates.com/tag/hsbc/” target=”_blank” rel=”follow”>LSE: HSBA</a>) were down 4.6% on Friday, losing along
with other financial institutions due to the panic caused by the collapse of
SVB. The market tested January lows and the new week does not bring a clearer
rebound. Despite news of SVB’s UK branch takeover, HSBA shares lost 0.5% and
are still moving near two-month lows.FCA Statement on Silicon Valley BankThe FCA
published a statement on Monday morning announcing that it is working closely
with the Bank of England, the Government and other regulators to ensure a safe
passage through the collapse of the SVB. ”This
morning, The Bank of England (Bank), in consultation with the Prudential
Regulation Authority (PRA), HM Treasury (HMT) and the Financial Conduct
Authority (FCA), has taken the decision to sell Silicon Valley Bank UK Limited
(‘SVBUK’), the UK subsidiary of the US bank, to HSBC UK Bank Plc (HSBC),”
the FCA confirmed the acquisition in the written statement.Despite the
recent developments, SVBUK retains its authorization from both the PRA and FCA,
and will continue to operate normally. The Bank of England and HM Treasury have
assured that depositors’ funds are secure as a result of the transaction.Customers
of SVBUK will retain their access to the Financial Services Compensation Scheme
and Financial Ombudsman Service, while their consumer rights remain unchanged.Regulators Resolve SBV’s
CrisisThe
consequences of the fallout are significant for the technology industry, given
the bank’s exclusive focus on that sector. Circle, the stablecoin issuer, <a href=”https://www.financemagnates.com/cryptocurrency/svb-crisis-circle-escapes-usdc-depeg-with-regulatory-assurance/” target=”_blank” rel=”follow”>held
$3.3 billion</a>, or 8 percent of the funds supporting the USDC, at Silicon Valley
Bank. The Federal Deposit Insurance Corporation (FDIC) only provides insurance
for deposits up to $250,000, which puts Circle’s stablecoin peg at risk.However, in
a joint statement issued on Sunday, Treasury Secretary Janet Yellen, Federal
Reserve Chair Jerome Powell, and FDIC Chairman Martin Gruenberg assured Circle
and other SVB depositors that they would have uninterrupted access to their
funds on Monday, allowing them to carry out their operations smoothly.In their
regulatory press release, the government emphasized that its intervention in
SVB will alleviate pressure on the financial system, maintain financial
stability, and reduce any adverse effects on businesses, households, taxpayers,
and the broader economy.