HSBC, a British multinational banking and financial services organization, has acquired Silicon Valley Bank UK for a symbolic €1. The deal was reached after a stressful weekend of hectic negotiations by the U.K. government, regulators, and several potential suitors following the U.K. company’s entry into bankruptcy processes on Friday. The U.K. company is a subsidiary of the struggling U.S. organization
The agreement is a huge relief for the U.K. technology industry, which was severely affected by the demise of SVB and its U.K. affiliate. The speedy completion of the transaction will be interpreted as a demonstration of the government’s support for technology and general faith in the financial system.
The HBSC Transaction and Payment
The transaction “completes instantaneously,” according to HSBC. Existing resources will be used to pay for the purchase. In a statement, the bank also stated:
“As of March 10, 2023, SVB UK has deposits of about £6.7 billion and loans of about 5.5 billion pounds. SVB UK reported a profit before tax for the fiscal year that ended on December 31, 2022, of £88 million. The estimated tangible equity for SVB UK is £1.4 billion. The final estimate of the acquisition’s gain will be given in due course.”
According to the Bank of England, all deposits made with SVB UK are secure, and the agreement guarantees the continuation of banking services.
Statements From Stakeholders
Here are some additional statements from Hunt and the government assuring clients that the financial system is unchanged. According to a statement from the Bank of England:
“SVB UK will carry on conducting regular business as usual. Customers should not notice any changes as all services will continue to run as usual.”
Clients can still reach SVB UK through the standard routes, and borrowers should continue making their regular loan repayments to SVB UK. SVB UK continues to be a PRA/FCA-authorized bank, and SVB UK employees are still employed there.
The Bank had previously said on March 10 that it intended to apply to the Court to have SVBUK placed into a Bank Bankruptcy Process in the absence of any material new information. This announcement overrides that declaration. Due to the appearance of a reliable buyer for SVBUK, the Bank has decided that it is appropriate to use its resolution powers to stabilize institutions.
These steps, as well as the resolution of SVBUK’s US parent bank, have no direct or significant negative effects on any other UK institutions. The overall banking system in the UK is still stable and well-capitalized.
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