Hong Kong/London (CNN) HSBC has snapped up the British arm of bankrupt Silicon Valley Bank, securing the deposits of thousands of UK tech firms that hold money with the lender.
If no buyer was found, SVB UK would be declared bankrupt by the Bank of England following the stunning collapse of her mother in the United States. Insolvency would leave customers with only guaranteed deposits worth up to £85,000 ($100,000) – or £170,000 ($200,000) for joint accounts.
In a statement, the central bank said it “can confirm that the money of all depositors at SVB UK is safe and secure as a result of this transaction”.
HSBC, Europe’s biggest bank, announced the £1 ($1.2) deal early on Monday, saying it would take effect “immediately”.
The acquisition should “end the nightmare that thousands of tech firms have experienced over the past few days,” Suzanne Streeter, head of money and markets at investment platform Hargreaves Lansdown, said in a statement.
SVB UK is a major banking partner for Britain’s tech sector and the failure of its parent has left tech executives scrambling to figure out how to withdraw their cash to pay staff and cover operating costs.
HSBC’s rescue is “fantastic news” for the UK startup ecosystem, said Piotr Pisarc, chief executive of Uncapped, a fintech startup that lends to other startups. “I think we can all relax a little bit today,” he told CNN.
Uncapped launched an emergency funding program on Saturday to help companies meet payroll and other obligations. It had received “hundreds” of applications from UK and US firms by Monday, according to Pisarz, who said he remained ready to support firms affected by SVB’s collapse. Uncapped also offers longer term bridging loans to help with working capital.
Pisartz said startups will likely look to diversify their banking relationships because of this event. It was an “unhealthy situation” to have around half of the UK’s start-up banking ecosystem with one institution, he added.
In a statement, HSBC chief executive Noel Quinn said the acquisition meant “SVB UK customers can continue to bank as usual, confident that their deposits are backed by the strength, safety and security of HSBC.”
“This acquisition makes excellent strategic sense for our UK business,” he said. “This strengthens our merchant banking franchise and enhances our ability to serve innovative and fast-growing businesses, including in the technology and life science sectors, in the UK and internationally.”
Bank stocks are down
London-listed HSBC shares fell after the market opened and were 3.6% lower in morning trade. The Stoxx Europe 600 banking index, which tracks 42 major banks in the European Union and the United Kingdom, also fell, trading down 5.6 percent.
British Chancellor of the Exchequer Jeremy Hunt sought to reassure investors about the health of the country’s wider banking system.
“There has never been a systemic risk to our financial stability in the UK,” he told reporters. “The UK banking system is extremely safe, it is well capitalised.
As of last Friday, SVB UK had loans of approximately £5.5 billion ($6.7 billion) and deposits of about £6.7 billion ($8.1 billion), according to HSBC’s statement. It also posted a pre-tax profit of £88 million ($106.5 million) in its latest fiscal year, which ended in December.
SVB, a lender best known for providing funding to start-ups, ran into liquidity problems in the United States, prompting a massive outflow from banks last week. That ultimately led to the collapse of it, the second largest financial institution in US history, on Friday.
US financial regulators reacted swiftly to fears of contagion over the weekend, announcing that customers of the failed bank would be able to access all their money from Monday.
Authorities also guaranteed deposits for customers of Signature Bank, a regional U.S. lender shuttered by regulators as it struggled financially in recent days.
– Hanna Ziadi contributed reporting.