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HSBC pays £1 to save UK Silicon Valley bank branch after all-night talks

WorldEuropeHSBC pays £1 to save UK Silicon Valley bank branch after all-night talks
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The logo of Silicon Valley Bank (SVB) can be seen through the rain covered window.

Justin Sullivan | Getty Images News | Getty Images

London – hsbc US tech startups on Monday announced a deal to buy the UK subsidiary of collapsed lender Silicon Valley Bank after overnight talks.

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HSBC confirmed that its UK ring-fence subsidiary, HSBC UK Bank, had agreed to acquire SVB UK for £1 ($1.21). The assets and liabilities of the parent company of SVB UK are excluded from the transaction.

HSBC Group CEO Noel Quinn said: “The acquisition strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including those in the technology and life-sciences sectors, in the UK and internationally.”

“SVB UK customers can continue to bank as usual, with the knowledge that their deposits are backed by the strength, safety and security of HSBC.”

As of Friday, SVB UK had loans of around £5.5 billion and deposits of around £6.7 billion, with £88 million of full-year profit before tax due in 2022, HSBC highlighted in Monday’s statement. The bank expects SVB UK’s tangible equity to be approximately £1.4 billion, but added that “the final calculation of the benefits arising from the acquisition will be provided in due course.”

The sale, facilitated by the Bank of England in consultation with the UK Treasury, will protect the deposits of SVB UK customers, the Treasury said in a statement.

HSBC shares closed provisionally down 4.1% on Monday.

British Finance Minister Jeremy Hunt insisted the deal “ensures customer deposits are safe and can bank normally without any taxpayer support.”

“The UK’s tech sector is truly world-leading and very important to the British economy, supporting hundreds of thousands of jobs,” he said.

Hunt said on Sunday that the UK administration and the Bank of England were working to “avoid or minimize” potential losses from SVB’s UK branch.

in parallel, US regulators approved the plans on Sunday For backstop depositors and financial institutions affiliated with the US parent company SVB.

The US Treasury Department has designated both SVB and the New York-based signature bankWho was it Closed on Sunday over fears of a similar contagionAs systemic risks, this enables both institutions to open in a way that protects depositors.

not a ‘systemic issue’

UK Treasury Economic Secretary Andrew Griffith indicated that the outcome of the SVB’s UK branch did not represent a “systemic issue” amid market concerns of a widening spread of withdrawals among lenders.

“The governor of the Bank of England has been very clear about the fact that this was not a systemic issue,” he told CNBC’s Silvia Amaro on Monday. “We have now resolved this bank, we have resolved it conclusively, and it is now well capitalized with HSBC, and is giving customers access to their deposits and their banking facilities while protecting the interests of taxpayers. Access will continue.”

UK Treasury Minister: Silicon Valley Bank collapse is not a systemic issue

He stressed the need to support businesses provided by SVB, focused on tech startups:

“This is an important area for us, and especially as they rely on their access to cash to do what they are exceptionally good at,” he said. “So it was an obvious priority for us this morning to give them the certainty, if we could, that they can continue to operate their business.”

A ‘huge sigh of relief’ for UK tech startups

Toby Mather, CEO and co-founder of startup children’s education platform Lingumi, has been a client of SVB for the past seven years, depositing 85% of the company’s cash with the stricken lender.

He told CNBC on Monday that the HSBC acquisition had brought a “huge sigh of relief” for the British startup.

Lingumi CEO: HSBC acquisition is one of the best results for UK tech startups
Sanome CEO: Quietly optimistic about markets after extremely difficult 48 hours

Bank of London CEO Anthony Watson said that SVB “cannot be allowed to fail given the vital community it serves.”

“This is a unique opportunity to ensure that the UK has a more diverse banking sector whilst allowing continuity of service for SVB’s UK customer base. Would be very disappointing.”

The Bank of England confirmed that no other UK banks were “directly materially affected by these actions, or by the resolution of SVBUK’s US parent bank,” adding that the wider British banking system “is safe, sound and well”. capitalized”.

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