HSBC has bought the UK arm of collapsed lender Silicon Valley Bank for a nominal value of £1 in a private sale backed by the government and the Bank of England.
The crisis erupted over the weekend with Mr Hunt warning hundreds of British technology firms were at significant risk following the lender’s collapse, and talks on the crisis continued on Sunday night.
The Bank of England declared insolvency on Friday for Silicon Valley Bank UK following the collapse of its US parent – the biggest bank failure since the 2008 financial crisis.
Fearing that the factors that led to the failure of the Santa Clara, California-based bank could spread, the US government moved to stop a potential banking crisis after the historic failure of the Silicon Valley bank, where all deposits were protected.
But it was confirmed by 7am on Monday that the deal would ensure that deposits were protected and that there would be no support for taxpayers.
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Mr Hunt said: “This morning the Government and the Bank of England assisted in the private sale of Silicon Valley Bank UK to HSBC.
“Deposits will be protected without taxpayer support. I said yesterday that we will take care of our technology sector, and we have worked urgently to deliver on that promise.”
He added: “The UK’s technology sector is truly world-leading and vital to the UK economy, supporting hundreds of thousands of jobs.
“I said yesterday that we care about our technology sector and we have worked urgently to deliver on that promise and find a solution that gives SVB UK customers confidence.
“The Government and the Bank of England have today facilitated the private sale of Silicon Valley Bank UK; this ensures that customers’ deposits are protected and they can do business as usual without the support of the tax payer. I’m glad we came to a solution in such a short period of time.”
HSBC chief executive Noel Quinn said in a statement that the acquisition made “excellent strategic sense”, while the group’s Tory Tom Tugendhat hailed the move as a “huge deal” on Twitter.
However, the Bank of London – the UK clearing bank, which also submitted a rescue bid for SVB UK – criticized the sale to HSBC as a “missed opportunity”.
It said: “For many, this is seen as a missed opportunity to support competition and innovation.
“It is wrong for legacy banks, which have provided poor service to UK businesses for years, to once again profit from their dominant position.
“Britain needs better. For our part, we at Bank of London are committed to serving the UK business community.”
Joe Biden meets Rishi Sunak in California
(PA wire)
The four-decade-old Silicon Valley bank was the 16th largest bank in the US until last week and is worth more than $200 billion.
The bank, based on California’s tech obsession, played an important role in supporting startups during the pandemic, which led to many deposits, which the bank then invested in government bonds. Although they seemed safe, when interest rates rose, they caused the share price of bonds to fall, and then the bank portfolio began to lose value.
Regulators were forced to rush to shut down a Silicon Valley bank on Friday amid a traditional bank run as depositors rushed to withdraw their funds immediately.
President Joe Biden said he would address the bank’s situation on Monday when he boarded Air Force One returning to Washington on Sunday evening.
In a statement, Mr. Biden also said he was “committed to holding those responsible for this mess fully accountable and continuing our efforts to strengthen oversight and regulation of big banks so we don’t end up in this position again.”
Some prominent Silicon Valley executives feared that if Washington did not bail out the failed bank, customers would flee to other financial institutions in the coming days.
Shares of other banks that cater to tech companies, including First Republic Bank and PacWest Bank, have fallen over the past few days.
The bank’s clients include a number of California wine companies, with many wineries relying on Silicon Valley Bank for loans, and tech startups dedicated to combating climate change.
