Tech sector sweats on Silicon Valley Bank rescue package

Bridge to secure SVB UK sought

Tech businesses banked by Silicon Valley Bank have had an anxious weekend waiting for a government response to the collapse of the US based bank.

HSBC has confirmed it has bought the bank which the Bank of England, which regulates the banking sector, placed into a “Bank Insolvency Procedure” on Friday.

SVB UK had loans of around £5.5bn and deposits of around £6.7bn and for the financial year ending 31 December 2022, recorded a profit before tax of £88m. SVB UK’s tangible equity is expected to be around £1.4bn.

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 which completes immediately and has been funded from existing HSBC resources.

A government statement said: “Customers of SVB UK will be able to access their deposits and banking services as normal from today.

“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.”

Chancellor Jeremy Hunt said: “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.

“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.

“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them.”

Dom Hallas, executive director of Coadec, a lobby group representing UK-based tech companies, who is close to the discussions, said: “There will be lots of detail still to come but this will be a huge relief for startups across the country. The Government deserves huge credit from the very top, to HM Treasury who understood the challenge and gripped it, to the huge number of civil servants who have likely not slept since Friday. It’s glib to say it – but there are hundreds of founders around the country who will thank you for your work.”

Bath based publisher Future announced this morning that its exposure to the bank will not affect its liquidity position.

 In a statement on the Stock Market the company said cash deposits with SVB accounted for less than three per cent of the group’s cash on hand, equivalent to less than £1m.

SVB also provided £50m of the group’s £900m total debt facilities. Of this £50m, approximately 48 per ceny is currently drawn.

Future, backed by a strong banking syndicate, has access to significant levels of liquidity. As at 10 March 2023, the group had access to £26m cash on hand and £438m of undrawn committed facilities excluding SVB’s undrawn hold.

On Friday the Bank of England, which regulates the banking sector, placed Silicon Valley Bank UK (SVBUK) into a “Bank Insolvency Procedure” so eligible depositors would be paid out by the Financial Services Compensation Scheme up to the protected limit of £85,000 or up to £170,000 for joint accounts. 

It said SVBUK’s other assets and liabilities would be managed in the insolvency by the bank liquidators and recoveries distributed to its creditors. Adding: “SVBUK has a limited presence in the UK and no critical functions supporting the financial system. In the interim, the firm will stop making payments or accepting deposits.”

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