HSBC announced today (13 March) that is has agreed to buy Silicon Valley Bank’s UK arm after the collapse of SVB in the US led to the UK arm being put into insolvency measures. Tech leaders had forecast an “existential threat” to the UK tech sector if a solution was not found quickly. As of 10 March, SVB UK had loans of around £5.5bn and deposits of around £6.7bn.
US regulators on Friday 11 March shut down SVB after depositors created a run on the bank, in the biggest financial institution collapse since the financial crisis. The Bank of England on Friday sought a court order to put the UK arm into an insolvency procedure after nervous investors began withdrawing their money.
Serial entrepreneur and venture capitalist Gerry Tan, who is the CEO of startup accelerator Y Combinator, said on Twitter that “this is an extinction level event for startups that will set startups and innovation back by 10 years or more. BIG TECH will not care about this, they will have cash elsewhere. All little startups, tomorrow’s Google and Facebooks, will be extinguished if we don’t find a fix.”
The UK acquisition for £1 by HSBC follows government-led crisis talks over the weekend to find a rescue package. A statement from the Chancellor on 12 March said: “The UK has a world leading tech sector, with a dynamic start-up and scale-up ecosystem. 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 government is treating this issue as a high priority, with discussions between the Governor of the Bank of England, the Prime Minister and the Chancellor taking place over the weekend. The government is working at pace on a solution to avoid or minimise damage to some of our most promising companies in the UK and we will bring forward immediate plans to ensure the short term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met.”
Over the weekend, over 200 UK startup entrepreneurs wrote to Chancellor Jeremy Hunt warning him that SVB UK’s insolvency poses an “existential threat to the UK tech sector.”
HSBC announced the acquisition to the London Stock Exchange this morning. “This acquisition makes excellent strategic sense for our business in the UK,” HSBC’s CEO Noel Quinn said, adding: “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.”
In the US, a joint statement from the Treasury, the Federal Reserve and Federal Deposit Insurance Corporation said that depositors would be fully protected.