Government facilitates sale of UK operations of failed Silicon Valley Bank to HSBC as authorities work to limit fallout of biggest bank failure since 2008
The government said on Monday morning it had struck a deal for the UK arm of failed Silicon Valley Bank to be sold to HSBC, as authorities raced to limit the fallout of the second-biggest bank failure in US history.
Santa Clara, California-based SVB, which had specialised in lending to early-stage tech companies, was closed and its assets seized by authorities on Friday.
The bank, founded in 1983, had seen increased customer withdrawals from its cash-strapped tech sector depositors in a trend that snowballed to unmanageable levels last week.
The failure placed at risk the deposits of the company’s 3,500 UK customers, who include venture capital investors and hundreds of tech startups.
The sale of SVB UK to HSBC for £1 followed overnight talks between the government, the Bank of England and HSBC executives.
The Bank of England had initially decided to put SVB UK into insolvency on Sunday.
Chancellor Jeremy Hunt had warned over the weekend that the failure could put hundreds of British tech and life sciences start-ups at risk.
“This morning, the government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC,” Hunt wrote on Twitter on Monday. “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.”
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 supportRead also : UK Launches £1 Billion FinTech Fund
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
In a sign of potential risks to the wider banking sector, New York-based Signature Bank also failed and had its assets seized on Sunday in the third-biggest US bank failure ever, as US authorities announced measures intended to prevent further bank runs.
The US’ biggest-ever bank failure was that of Washington Mutual in 2008 amidst the global financial crisis.
The US Treasury Department, Federal Reserve and FDIC said on Sunday that all SVB and Signature Bank clients would be able to access the entirety of their funds on Monday.
“This step will ensure that the US 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,” the agencies said in a joint statement.
Separately, the Fed late on Sunday announced an emergency lending programme intended to give banks quick access to inexpensive loans in order to allow them to cover withdrawals without having to sell assets at a loss.
The SVB failure follows the collapse last week of Silvergate Capital, one of the two main banks for the cryptocurrency industry, which itself has recently seen a number of high-profile failures .