HSBC came through to do the needful to pick up SVB UK and thus ease any tensions the wider banking sector may have had. Image Credit: Shutterstock

London: HSBC bought the UK arm of Silicon Valley Bank for a symbolic one pound on Monday, rescuing a key lender for technology startups in Britain, as the biggest bank collapse since the financial crash continued to roil markets.

The deal, which sees one of the world’s biggest banks, with $2.9 trillion of assets, take the doomed British arm of the tech lender under its wing, brought to an end frantic weekend talks between the government, regulators, and prospective buyers.

It came after US authorities moved on Sunday to shore up deposits and try to stem any wider contagion from the sudden collapse of its parent Silicon Valley Bank.

But a global rout in stocks continued on Monday, with European banks shedding as much as 6 per cent on the day. That left them on track for their worst two-day drop since the Ukraine war began in February 2022. HSBC shares were down 3.8 per cent.

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The rescue of SVB UK was welcomed by British government ministers, regulators and technology startups, who said customers would be able to bank as normal. “HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them,” Britain’s finance minister Jeremy Hunt said.

“We were faced with a situation where we could have seen some of our most important companies - our most strategic companies - wiped out, and that would have been extremely dangerous.”

Asked about HSBC’s white-knight role, Hunt said his priority had been to avoid using British taxpayers’ money. The Bank of England said it had organised the sale to underpin confidence in the financial system and minimise any fallout for British tech firms.

It said deposits at the bank were safe as a result of the sale, and that the wider banking system was safe. “On the face of it appears a good deal,” Richard Marwood, senior fund manager and HSBC investor at Royal London Asset Management, said. “SVB lacked liquidity and depositor confidence - HSBC has both of those in spades.”

SVB UK is ring-fenced from the US group, and HSBC said the assets and liabilities of the parent company were excluded from the transaction. “This acquisition makes excellent strategic sense for our business in the UK,” HSBC CEO Noel Quinn said in a statement.

SVB UK has loans of around 5.5 billion pounds and deposits of around 6.7 billion pounds, HSBC said, adding the takeover completes immediately. The Bank of England said SVB UK had a total balance-sheet size of around 8.8 billion pounds.

Unlike the US, Britain has not announced broader liquidity measures for the banking system. Dozens of listed British companies issued statements on Monday about their exposure to SVB UK, seeking to reassure investors - or in some cases warn them - just as news of the rescue deal was announced.

THG, an online retail platform, card maker Moonpig and Naked Wines issued statements saying they were either not exposed or did not expect to be affected.

Industry bodies representing startups welcomed the takeover deal for shielding them from financial turmoil, including the biotech sector where about 40 per cent of companies banked with SVB UK.

Other potential buyers for SVB UK had included Bank of London, which said on Sunday it had submitted a formal proposal. SoftBank-owned lender OakNorth Bank also considered bidding. Abu Dhabi state-backed investment vehicle ADQ was also looking, according to media reports.