HSBC buys UK operations from SVB for just over a dollar

Hong Kong/London(CNN) HSBC has taken over the UK branch of the bankrupt Silicon Valley Bank, securing the deposits of thousands of UK tech companies that hold money with the lender.

If a buyer had not been found, SVB UK would have been placed in bankruptcy by the Bank of England following the resounding collapse of its parent company in the United States. Insolvency would have left customers with deposits worth up to £85,000 ($100,000) – or £170,000 ($200,000) for joint accounts – secured.

In a statement, the central bank said it “can confirm that all depositors’ money with SVB UK is safe and secure following 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 companies have had in recent days,” Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said in a statement.

SVB UK is a major banking partner in Britain’s tech sector, and the failure of its parent company has tech executives scrambling to figure out how to get their money out to pay staff and cover operating expenses.

The bailout of HSBC is “fantastic news” for the UK startup ecosystem, said Piotr Pisarz, 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 on Saturday to help businesses meet payroll and other obligations. He had received “hundreds” of applications from British and American businesses on Monday, according to Pisarz, who said he remained ready to support businesses affected by the SVB’s collapse. Uncapped also offers longer-term bridging loans to help with working capital.

Pisarz said startups would likely seek to diversify their banking relationships due to this event. It was an “unhealthy situation” to have around half of Britain’s startup banking ecosystem with just one 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 strength, safety and security of HSBC”.

“This acquisition makes excellent strategic sense for our UK business,” he said. “It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing businesses, including in the technology and life sciences sectors, in the UK and internationally.”

Bank stocks slide

London-listed HSBC shares fell after the market opened and were down 3.6% in morning trading. The Stoxx Europe 600 banking index, which tracks 42 major banks in the European Union and the United Kingdom, also took a hit, trading down 5.6%.

UK Finance Minister Jeremy Hunt sought to reassure investors about the health of the country’s banking system.

“The UK banking system is extremely secure, it is well capitalised,” he told reporters, according to Reuters.

As of Friday, SVB UK had loans of around £5.5 billion ($6.7 billion) and deposits of around £6.7 billion ($8.1 billion), according to the HSBC press release. It also posted a pre-tax profit of £88m ($106.5m) in its last financial year which ended in December.

SVB, a lender best known for providing financing to startups, had faced liquidity problems in the United States, triggering a huge run on banks last week. That ultimately led to its collapse, the second largest financial institution in US history, on Friday.

US financial regulators reacted quickly to contagion fears over the weekend, announcing that customers of the bankrupt bank would have access to all their money from Monday.

Authorities also guaranteed deposits for customers of Signature Bank, a U.S. regional lender shut down by regulators because it had run into financial difficulties in recent days.

— Hanna Ziady contributed report.

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