The Bank of England stated that the UK’s larger banking sector is “safe and well-capitalized,” therefore the failure of Silicon Valley Bank would not have a significant impact there.
The government and HSBC revealed on Monday that HSBC had purchased the UK division of the bankrupt American lender Silicon Valley Bank for a paltry 1 pound ($1.2) as part of a rescue agreement.
The transaction was authorized by the Bank of England and the Treasury UK Treasury department using authority provided by the nation’s Banking Act 2009 following the failure of SVB on Friday, which raised concerns in Britain about its critical clients in the technology and life science industries.
The Treasury emphasized that there is no involvement of taxpayer money.
In response to fears that the UK’s technology and life sciences businesses will be decimated without assistance, ministers and bureaucrats spent the weekend developing strategies to ringfence such areas. SVB describes itself as “the go-to banking partner for founders, entrepreneurs, and investors,” while being modest in comparison to the UK’s top banks.
In a statement following contentious negotiations that were supposedly led by Prime Minister Rishi Sunak, the government announced the sale of Silicon Valley Bank (UK) Ltd. to HSBC.
According to HSBC, as of March 10, Silicon Valley Bank UK Ltd has loans totaling around £5.5 billion and deposits totaling about £6.7 billion.
HSBC’s worldwide balance sheet is not anticipated to be impacted by the transaction, but its domestic market exposure would increase, according to Sky News.
HSBC CEO Noel Quinn remarked, “This acquisition makes tremendous strategic sense for our business in the UK.”
“It enhances our capacity to serve creative and rapidly growing businesses, notably those in the technology and life science industries, both domestically and abroad, and strengthens our commercial banking franchise.”
“Customers of SVB UK may go on with their regular banking activities in the assurance that their deposits are secured by HSBC’s strength, safety, and security.”
With more than 3,000 SVB UK clients having accounts totaling more than $US8.1 billion, the action safeguards their savings.
“The UK’s IT industry is really at the forefront of the global market and is vital to the British economy, sustaining hundreds of thousands of employees. I promised on Sunday that we would protect the IT industry, and we have worked quickly to keep that promise and come up with a solution that will give SVB UK’s clients confidence, stated UK Chancellor Jeremy Hunt.
“Today the government and the Bank of England enabled a private sale of Silicon Valley Bank UK, ensuring that client deposits are safeguarded and that they may conduct banking as usual without receiving any assistance from the taxpayer. I am happy that we were able to resolve this quickly,” he added.