After the late-night discussion, HSBC settles £1 to save the U.K. arm of Silicon Valley Bank

March 14, 2023: -Following all-night talks, HSBC reported a contract to purchase the U.K. subsidiary of collapsed U.S. tech startup lender Silicon Valley Bank on Monday.

HSBC stated that its U.K. ring-fenced subsidiary, HSBC UK Bank, had agreed to adapt SVB U.K. for £1. The SVB’s assets and liabilities U.K.’s parent firm are excluded from the transaction.

The requirement “strengthens our commercial banking franchise and enhances our capacity to serve innovative and fast-developing firms, such as in the technology and life-science areas, in the U.K. and internationally,” the HSBC Group CEO Noel Quinn stated.

“SVB U.K. customers can keep to the bank as usual, protected in the knowledge that the strength, safety and security of HSBC back their deposits.”

On Friday, SVB U.K. had loans of nearly £5.5 billion and deposits of around £6.7 billion, with £88 million of complete year profit before tax in 2022, HSBC highlighted on Monday. The bank anticipates SVB U.K.’s tangible equity to be nearly £1.4 billion but stated that “final calculation of the gain increase from the acquisition will be given in due course.”

The sale, started by the Bank of England in consultation with the U.K. Treasury, protects the deposits of SVB U.K. people, the Treasury stated.

Shares of HSBC provisionally closed 4.1% lower on Monday.

British Finance Minister Jeremy Hunt stresses that the deal “ensures customer deposits are safeguarding and can bank as normal, with no taxpayer help.”

“The U.K.’s tech area is world-leading and of huge significance to the British economy, helping hundreds of thousands of jobs,” he added.

On Sunday, Hunt had said that the U.K. administration and the Bank of England were working to “avoid or minimize” potential damage from the U.K. branch of SVB.

On Sunday, in parallel, U.S. regulators approved plans to backstop depositors and financial institutions connected with U.S. parent company SVB.

The U.S. Treasury Department designated SVB and New York-based Signature Bank, which was shuttered on Sunday regarding similar contagion issues, as systemic risks, which enables it to unwind both institutions in a way that safeguards depositors.