HSBC buys Silicon Valley Bank UK

Customers and businesses who have money deposited in SVB UK will be able to access it as normal. No taxpayer money was involved.

HSBC CEO Noel Quinn, said customers of SVB UK could “continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC”.

There were several potential acquirers of SVB UK  besides HSBC – JP Morgan, Lloyds, the digital lender Oaknorth Bank, the two year-old Bank of London and ADQ, an Abu Dhabi state-backed fund.

The US government is guaranteeing that customers of SVB US will have access to their cash on Monday morning.

Apparently SVB’s American parent had invested $80 billion of its customers’ cash in mortgage-backed securities yielding an average of 1.56% which fell in value as the Fed raised interest rates which made government  bonds a more attractive investment.

Customers are said to have started pulling funds out and closing their SVB accounts last December and when SVB, which had been without a Chief Risk Officer from April 2022 till January 2023, realised it had to sell securities at a loss to meet commitments to customers, the securities had fallen in value to less than its commitments – making the bank technically insolvent.

The screw was turned when VCs told their portfolio companies to switch their bank accounts out of SVB into larger banks – a process which the larger banks are reported to have encouraged.

250 UK tech CEOs wrote a letter to the Chancellor of the Exchequer saying: “The recent news about SVB going into insolvency represents an existential threat to the UK tech sector.”

“This weekend the majority of us as tech founders are running numbers to see if we are potentially technically insolvent,” said the CEOs.

The Chancellor of the Exchequer  said yesterday:,“I’ve been in discussions over the weekend, until late last night, with the Prime Minister, the Governor of the Bank of England, many other people.”

“There is a serious risk to our technology and life sciences sectors,” he said, adding that SVB “happens to look after the money of some of our most promising and exciting businesses and so I want to reassure people.”

‘We are working at pace on a solution. We will bring forward very soon plans to make sure people are able to meet their cashflow requirements, pay their staff,” he continued, “but obviously what we want to do is to find a longer-term solution that minimises or even avoids completely losses to some of our most promising companies.”

Asked if the government was considering a taxpayer-funded bail-out, the Chancellor replied: “’I don’t want to go in with what the solution is. But I will say, because people are worried about paying their staff next week, is we will come forward with a solution that helps those very, very, important companies with things like payroll and their cash flow requirements.”

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