HSBC buys Silicon Valley Bank’s UK business, ending ‘nightmare’ for British tech

HSBC’s London headquarters, pictured here on 14th October 2022, has bought up SVB’s UK arm
(Mike Kemp/In Pictures/Getty Images)

By Michelle Toh, Rob North and Olesya Dmitracova | CNN

HSBC has scooped up the UK arm of failed Silicon Valley Bank, securing the deposits of thousands of British tech firms that hold money at the lender.

Had a buyer not been found, SVB UK would have been placed into insolvency by the Bank of England following the stunning collapse of its parent in the United States. Insolvency would have left customers with only deposits worth up to £85,000 ($100,000) — or £170,000 ($200,000) for joint accounts — guaranteed.

In a statement, the central bank said it “can confirm that all depositors’ money with SVB UK is safe and secure as a result of this transaction.”

HSBC, Europe’s biggest bank, announced the £1 ($1.2) deal early Monday morning, saying it would be effective “immediately.”

The acquisition should “end the nightmare thousands of tech firms had been experiencing over the past few days,” Susannah Streeter, head of money and markets at investing platform Hargreaves Lansdown, said in a statement.

SVB UK is a major bank partner for Britain’s tech sector, and the failure of its parent sent tech executives scrambling to work out how to get their cash out to pay staff and cover operating expenses.

The HSBC rescue is “fantastic news” for the UK startup ecosystem, said Piotr Pisarz, the CEO of Uncapped, a financial tech startup that lends to other startups. “I think we can all relax a bit today,” he told CNN.

Uncapped had launched an emergency funding program Saturday to help companies meet payroll and other obligations. It had received “hundreds” of applications from UK and US firms by Monday, according to Pisarz, who said it remained ready to support firms affected by the SVB collapse. Uncapped is also offering longer-term bridge loans to help with working capital.

Pisarz said startup companies would likely look to diversify their banking relationships because of this event. It was an “unhealthy situation” to have around half of Britain’s startup ecosystem banking with a single institution, he added.

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

“This acquisition makes excellent strategic sense for our business in the UK,” he said. “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.”

Bank stocks slide

HSBC’s London-listed shares fell after market open and were 3.6% lower in morning trading. The Stoxx Europe 600 banking index, which tracks 42 big European Union and UK banks, also took a knock, trading 5.6% down.

Britain’s finance minister Jeremy Hunt sought to reassure investors on the health of the country’s broader banking system.

“There was never a systemic risk to our financial stability in the UK,” he told reporters. “The UK banking system is extremely secure, it’s well-capitalized.”