SVB’s U.K. arm bought for £1 by HSBC after Treasury and Bank of England lead negotiations

HSBC has bought the U.K. division of Silicon Valley Bank for £1 in a deal thrashed out over the weekend by the U.K. Treasury, the Bank of England and Europe’s biggest bank by deposits.

The rescue was arranged after U.S. parent group Silicon Valley Bank was taken over by regulators on Friday, the second biggest bank failure in U.S. history. The move followed a $42 billion run on the tech-focused lender after depositors were spooked by SVB’s losses on its bond holdings.

“This transaction has been facilitated by the Bank of England, in consultation with the Treasury, using powers granted by the Banking Act 2009. No taxpayer money is involved, and customer deposits have been protected,” said the Treasury in a statement.

HSBC’s capture of SVB U.K. came in competition with a Middle Eastern buyer, according to the Financial Times, and bids from British banks OakNorth and the Bank of London.

Neither the U.K. government nor the Bank of England gave HSBC any guarantees over its purchase of SVB U.K., Treasury minister Andrew Griffith told Bloomberg.

However, HSBC was given an exemption over rules that do not allow complicated corporate customers to be housed within ring-fenced banks — a regulation to keep retail banking separate from riskier investment activities which was designed in response to the global financial crisis of 2008.

Noel Quinn, HSBC Group CEO, said, “This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the U.K. and internationally”.

HSBC said that SVB U.K. had loans of around £5.5 billion ($6.7 billion) and deposits of around £6.7 billion. For the financial year ending 31 December 2022, SVB U.K. recorded a profit before tax of £88 million. SVB UK’s tangible equity is expected to be around £1.4 billion.

“Final calculation of the gain arising from the acquisition will be provided in due course. The assets and liabilities of the parent companies of SVB UK are excluded from the transaction. The transaction completes immediately. The acquisition will be funded from existing resources,” said HSBC in a statement.

The high level negotiations reflected the U.K. government’s concerns that the failure of SVB U.K. would badly impact Britain’s technology sector.

“The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs. I said yesterday that we would look after our tech sector, and we have worked urgently to deliver on that promise and find a solution that will provide SVB UK’s customers with confidence,” said Jeremy Hunt, U.K. chancellor.

“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,” Hunt added.