HSBC buys Silicon Valley Bank’s UK business for £1 after collapse of US parent company

HSBC has been fined £57.4m by the Bank of England for "serious failings" over its measures to protect customer deposits.

HSBC has acquired the UK arm of Silicon Valley Bank for £1 after a weekend of crisis talks with the Bank of England and government ministers following the collapse of the bank’s US parent.

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

More than 3,000 British tech firms have deposits with Silicon Valley Bank UK. There had been warnings that many would be unable to pay their staff and creditors unless a rescue package could be agreed.

Quinn said the acquisition made strategic sense for its 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,” he said.

In a brief stock exchange statement HSBC, Europe’s biggest bank, said SVB UK had loans of about £5.5 billion and deposits of about £6.7 billion. For the financial year ending on December 31, 2022, SVB UK recorded a profit before tax of £88 million. It said it would update shareholders further alongside first quarter results in May.

Jeremy Hunt, the chancellor, spent the weekend in talks with the Bank of England and financial regulators to contain the fallout from the collapse of SVB in America on Friday.

“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs. I said yesterday that we would look after our tech sector,” Hunt said.

He said the sale of Silicon Valley Bank UK to HSBC “ensures customer deposits are protected and can bank as normal, with no taxpayer support”.

In a separate announcement the Bank of England said the decision to sell was made in consultation with the Prudential Regulation Authority, the Treasury and the Financial Conduct Authority.

“The Bank and HM Treasury can confirm that all depositors’ money with SVB UK is safe and secure as a result of this transaction. SVB UK’s business will continue to be operated normally. All services will continue to operate as normal and customers should not notice any changes,” the Bank said.

Equity markets were calmed by a pledge by American regulators late last night to protect the deposits of American SVB customers amid fears of a nationwide run across the banking system. Jitters have spread to the US government bond market, however.

The price of short-dated bonds rallied sharply and yields fell after Goldman Sachs forecast that the Federal Reserve would not increase interest rates to ease stress in the financial sector from SVB. In Asian trading the yield on the two-year Treasury bond were on track for the steepest three-day decline since Black Monday in October 1987, down 18 basis points to 4.34 per cent.