HSBC Holdings is on the brink of a deal to rescue Silicon Valley Bank UK (SVBUK) after a last-ditch agreement that will avert the technology focused lender’s insolvency.
Sky News has learnt that HSBC was on Monday morning preparing to announce alongside the government that it had struck a deal to acquire the stricken bank.
The FTSE-100 banking behemoth had emerged as a potential ‘white knight’ bidder for SVBUK on Sunday evening as the government and regulators scrambled to prevent its demise causing carnage across the UK’s tech sector..
The emergency sale process, overseen by Rothschild, was triggered by the collapse into government ownership of SVB’s American parent last week.
The Bank of England is expected to say as part of the rescue deal that all depositors’ money is safe and that the bank will continue to operate as normal under the ownership of HSBC Bank UK plc.
Over the weekend, the Bank of England had been preparing to place SVB UK into an insolvency process as soon as Monday.
It is expected to reassure markets by reaffirming its position that the broader UK banking system remains resilient
JP Morgan, the American banking behemoth, and Britain’s major high street banks had also been asked to examine a bid, while smaller peers including Oaknorth Bank and The Bank of London also submitted rescue offers on Sunday.
The rescue deal will not be material to HSBC in the context of its global balance sheet, but will sharpen its exposure in its home market of the UK to corporate clients in the tech and biotech sectors.
The Treasury said in a statement on Sunday that the government was working on funding solutions to help hundreds of SVB UK clients meet cashflow obligations.
“The UK has a world leading tech sector, with a dynamic start-up and scale-up ecosystem,” it said.
“The government recognises that, given the importance of Silicon Valley Bank to its customers, its failure could have a significant impact on the liquidity of the tech ecosystem.
“The government is treating this issue as a high priority, with discussions between the Governor of the Bank of England, the Prime Minister and the Chancellor taking place over the weekend.
“The government is working at pace on a solution to avoid or minimise damage to some of our most promising companies in the UK and we will bring forward immediate plans to ensure the short term operational and cashflow needs of Silicon Valley Bank UK customers are able to be met.”
The implosion of SVB’s US-listed parent company, which has been taken into government control, represents one of the biggest global banking collapses since the financial crisis of 2008.
UK depositors stand to receive up to £85,000 as part of the resolution of the British arm of SVB, sparking fears about the fate of substantial amounts of funding in the start-up community.
“We are working at pace on a solution we will bring forward very soon plans to make sure people are able to meet their cashflow requirements, pay their staff,” Jeremy Hunt, the chancellor, told Sophy Ridge on Sunday.
“But obviously what we want to do is to find a longer-term solution that minimises or even avoids completely losses to some of our most promising companies.”
On Saturday, dozens of early-stage companies wrote to Mr Hunt to warn of “an existential threat to the UK tech sector”.
In a letter seen by Sky News, founders including those from Adzuna, Curve and Thriva called on Mr Hunt to intervene.
“The majority of the most exciting and dynamic tech businesses bank with SVB and have no or limited diversity in where their deposits are held,” the draft letter said.
“This weekend the majority of us as tech founders are running numbers to see if we are potentially technically insolvent.
“The impact of this is far greater than our individual businesses.
“The Bank of England’s assessment that SVB going into administration would have limited impact on the UK economy displays a dangerous lack of understanding of the sector and the role it plays in the wider economy, both today and in the future.”
The founders warned Mr Hunt, who will deliver his Budget statement on Wednesday, that the collapse of SVB UK would “cripple the sector and set the ecosystem back 20 years”.
“Many businesses will be sent into involuntary liquidation overnight,” they wrote.
“Many other businesses, both in the tech sector and the wider economy – the customers and suppliers of these businesses – will be negatively impacted by these businesses going bankrupt.”
