The bank HSBCthe largest in Europe, bought the British subsidiary of Silicon Valley Bank on Monday for a symbolic price of one poundthereby rescuing a key player for UK tech start-ups and helping stem the fallout from the biggest bank crash since the 2008 financial crisis.
In a statement sent to the Hong Kong Stock Exchange, where it is listed, HSBC estimates the tangible capital of the SVB’s British subsidiary at around 1,400 million pounds (1,694 million dollars, 1,581 million dollars).
The operation comes after the US authorities moved to shore up the deposits and stem any broader contagion from the sudden bankruptcy of its parent, Silicon Valley Bank.
The deal, which sees HSBC, one of the world’s largest banks with assets worth $2.9 trillion, take over the UK arm of the technology sector bank, ends frantic talks over the weekend between the UK government, regulators and potential buyers.
“HSBC is the largest bank in Europe, SVB UK clients should take comfort in the strength, security and protection it provides”, declared the British Chancellor of the Exchequer, Jeremy Hunt.
“We were faced with a situation where we could have seen some of our most important companies – our most strategic companies – disappear, that would have been extremely dangerous,” Hunt told reporters.
Asked about HSBC’s “white knight” role, Hunt said the Ministry of Finance’s priority had been to avoid the use of taxpayers’ money British. One pound, the symbolic price of the operation, is worth $1.21.
The Bank of England said it arranged the sale to bolster confidence in the financial system and minimize the fallout for British technology companies.
the monetary institution said that deposits in the bank are safe as a result of the saleadding that the banking system in general is safe.
Harriett Baldwin MP, the head of the Treasury Select Committee, welcomed the sale agreement as the “best possible result in these difficult circumstances”.
“Thank you to all who have worked tirelessly to achieve this. I look forward to the opportunity to ask questions in the UK Parliament later on,” Baldwin tweeted.
Britain’s FTSE 100 index was down 1% in early trading on Monday, after falling 1.7% on Friday as global markets turmoil sparked by the SVB bankruptcy. HSBC shares were down 1.7%.
“At first sight, seems like a good dealsaid Richard Marwood, a fund manager and investor in HSBC of Royal London Asset Management. “SVB lacked liquidity and depositor confidence; HSBC has both in abundance”.
SVB UK is separate from the US group. HSBC said that the assets and liabilities of the parent company were excluded from the transaction.
“This acquisition makes excellent strategic sense for our UK business,” HSBC CEO Noel Quinn said in a statement.
SVB UK has loans of around £5.5bn and deposits of around £6.7bnsaid HSBC, adding that the acquisition has been completed immediately.
According to the Bank of England, SVB UK has a total balance of about 8,800 million pounds.
Unlike the United States, the United Kingdom has not announced broader liquidity measures for its banking system.
Dozens of publicly traded British companies issued statements on Monday about their exposure to SVB UK, trying to reassure investors, or in some cases warn them, just as news of the bailout deal broke.
THG, an online retail platform, card maker Moonpig and Naked Wines issued statements saying they are not exposed or expect to be affected by the situation. Diaceutics warned that its liquidity will be affected.
Other companies had also studied the possibility of buying the bank. Bank of London said on Sunday that it had submitted a formal proposal. OakNorth Bank, owned by SoftBank, was also weighing an offer, a person with knowledge of the talks told Reuters.
(With information from Reuters and EFE)
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