Taken into incubation by HSBC
Hundreds of British tech startups were saved from disaster today as HSBC bought the UK arm of collapsed US lender Silicon Valley Bank, reports the Mail Online. After overnight crisis talks, UK Chancellor Jeremy Hunt announced that all deposits had been protected and customers could access their deposits and banking services as normal from today. The minister has Hunt stressed that no taxpayer funding was involved, with the transaction ‘facilitated’ by the Bank of England in consultation with the Treasury, using powers introduced after the 2008 Credit Crunch.
The crisis erupted when California-based parent company Silicon Valley Bank imploded and had its assets seized by US regulators on Friday – the largest failure of a bank since the financial crisis. The Bank of England then ordered the UK subsidiary of SVB into insolvency from last night.
“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” Hunt said this morning, “I said yesterday that we would look after our tech sector, and we have worked urgently to deliver on that promise. Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customer deposits are protected and can bank as normal, with no taxpayer support. I am pleased we have reached a resolution in such short order.”
A statement from the BofE said this action was taken to stabilise SVBUK, ensure the continuity of banking services, minimising disruption to the UK technology sector and support confidence in the financial system. JP Morgan had also been among the parties exploring buying the bank’s British operations, Sky News previously reported. Oaknorth Bank had also been in takeover talks, the PA news agency understands. There was also interest from The Bank of London and Abu Dhabi state-backed investment vehicle ADQ, said Sky.
HSBC chief executive Noel Quinn said the acquisition makes: “excellent strategic sense for our business in the UK.” A survey of 31 venture capital funds, which hold thousands of investments in UK tech and science firms, found that 34 per cent of their portfolio companies – amounting to 336 – have accounts with the Silicon Valley bank. As many as 200 of those had faced short or long-term cashflow risk, according to the data from BVCA – the industry body representing venture capital investors – had SVBUK collapsed. Around £2.5billion of capital from these firms is locked in the lender.
The Coalition for a Digital Economy (Coadec), a non-profit campaigning for policies to support digital start-ups, had previously warned that a collapse of SVBUK could have had a significant impact on these types of companies. Many other businesses were feared to be affected with the Times newspaper reporting that more than 3,000 firms have around £7 billion in deposits with the UK subsidiary.
Speaking before the HSBC deal, Mr Hunt had warned the tech and science sectors were at ‘serious risk’, but said there was no risk to the UK’s financial system as a whole.