HSBC buys Silicon Valley Bank UK to protect startups from going out
The acquisition of Silicon Valley Bank UK will allow HSBC to expand its presence in the technology industry and further develop its fintech capabilities.
Following the sudden collapse of US-based Silicon Valley Bank, HSBC Holdings has completed the purchase of SVB’s UK arm for £1 ($1.21). The deal, which came after hours of negotiations involving the British government, regulators and a consortium of private equity firms, was a move to save Britain’s tech startups from impending collapse.
British tech firms are cash-strapped
With the California-based Silicon Valley Bank no longer able to meet withdrawal demands in the US, the potential collapse of SVB UK – which is said to have around 3,300 UK clients including startups, venture firms and funds – has raised fears for Britain’s tech and life because of scientific industries.
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UK technology companies have experienced a certain amount of cash shortages, which has left some unable to access their funds held in SVB UK. Daily Mail was reported that UK tech companies including Pinterest and online retail giant Shopify were affected as they battled wage cuts.
The situation forced the The Bank of England issues a statement on March 10, that it is ready to apply to the Court of Justice to bring SVB UK bank under insolvency proceedings, if there is no significant intervention.
However, with HSBC’s intervention, tech leaders and startup founders continue to bank as usual, as all deposits are insured.
“This action has been taken to stabilize SVB UK, ensure continuity of banking services, minimize disruption to the UK technology sector and support confidence in the financial system” – said the Bank of England in its press release after the deal is done.
“This acquisition is of excellent strategic importance to our UK business,” said HSBC Group Chief Executive Noel Quinn. “It will strengthen our merchant banking franchise and improve our ability to serve innovative and high-growth companies, including the technology and life sciences sectors, in the UK and internationally.
“We welcome SVB UK clients to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can continue to bank as usual, knowing that their deposits are backed by the strength, safety and security of HSBC.”
How much has it affected the UK tech industry?
SVB UK has operated as a technology-friendly financial institution, helping to provide loans and savings to a number of technology companies in the UK. The Economic TimesIn Europe, some 16 technology and life sciences companies disclosed exposure of more than £156.10 million (US$190 million) to SVB in the UK and US. In the UK, some of these companies were involved prior to HSBC’s acquisition.
Trustpilot Group, a global review platform, confirmed that the company was unable to transfer $18 million of the total funds held by SVB in the UK. Another technology company, Diaceutics, was unable to move its funds from the bank when word of a possible collapse spread. The situation was forced to temporarily suspend Diaceutics from AIM.
Following the events, around 210 companies and startups wrote an open letter to British Chancellor Jeremy Hunt at the Treasury, asking for financial help.
The letter was signed by around 140 CEOs and founders of well-known brands, including Zoom Video Communications, GitHub, Stripe, DocuSign, Atlassian, Coursera, Slack Technologies, Eventbrite, Fitbit, GoPro, Twilio, Box, Asana, Cloudera, Dropbox and SurveyMonkey – they all called for urgent action from the UK government.
What does this mean for UK tech leaders?
The UK startup scene saw a significant increase in tech investment last year, but it would have taken a huge hit without government intervention. Based on eWeekIn 2022, the UK ranked second in global startup funding with £12.7 billion (US$15.47 billion) in tech investment. The record lifted the UK above China and India, signaling a new wave of digital acceleration promised by the UK government. more financial and regulatory support for the technology industry in the country.
Timely government intervention that helped HSBC take over SVB restored hope among tech investors in the country. Some technology leaders also reacted to the development. Dom Hallas, executive director of the Coalition for the Digital Economy he tweeted that the government’s actions have “saved hundreds of the UK’s most innovative companies”.
“It is fantastic news that HSBC is acquiring SVB UK. A good result that will help the UK tech sector grow. A great relief for many.” Daniel Korski, CEO and co-founder of PUBLIC shared a it beeps.
Meanwhile, in the US, the financial and technology sectors continue to struggle to fully recover from the collapse of the SVB. A joint effort by the US Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation seeks to resolve the parent company’s problems. Emergency measures have been taken recently announced supporting banks and reassuring depositors that their money is safe.
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