HSBC UK Bank plc, the British subsidiary of the HSBC Holdings plc banking giant, has announced the acquisition of the Silicon Valley Bank (SVB) UK Limited, the local part of a failed US financial institution, for a symbolic pound. In addition, the Financial Conduct Authority (FCA) has issued a statement on SVB's activities in the country.

Silicon Valley Bank Collapses

On 10 March, US authorities ordered SVB to cease its operations, triggering a panic spreading through the markets. Cryptocurrencies, among others, lost dynamically, as many of the leading digital asset companies had significant exposure to the bank, being its significant depositors.

However, the situation started to return to normal on Monday, with incoming information from regulators suggesting that a repeat of the financial crisis that occurred in 2008 with the collapse of Lehman Brothers will be avoided.

SVB's bankruptcy provided an opportunity for other players in better financial shape to make lucrative acquisitions. HSBC officially announced on 13 March that its UK division was acquiring SVB's UK division for £1.

"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 UK and internationally," Noel Quinn, the CEO of HSBC Group, commented.

HSBC Takes Advantage and Buys SVB UK

As of 10 March 2023, SVB UK boasts loans totaling roughly £5.5 billion, while deposits come in at approximately £6.7 billion. For the financial year that ended on 31 December 2022, the company reported a pre-tax profit of £88 million. The expected value of SVB UK's tangible equity is around £1.4 billion.

HSBC will provide an update on the final calculation of the gain resulting from the acquisition at a later time. It's worth noting that the transaction excludes the assets and liabilities of SVB UK's parent companies, and it has been completed immediately using existing resources to fund the acquisition.

"We welcome SVB UK's customers 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, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC. We warmly welcome SVB UK colleagues to HSBC, we are excited to start working with them," Quinn added.

HSBC shares on the London Stock Exchange (LSE: HSBA) were down 4.6% on Friday, losing along with other financial institutions due to the panic caused by the collapse of SVB. The market tested January lows and the new week does not bring a clearer rebound. Despite news of SVB's UK branch takeover, HSBA shares lost 0.5% and are still moving near two-month lows.

FCA Statement on Silicon Valley Bank

The FCA published a statement on Monday morning announcing that it is working closely with the Bank of England, the Government and other regulators to ensure safe passage through the collapse of SVB.

"This morning, The Bank of England (Bank), in consultation with the Prudential Regulation Authority (PRA), HM Treasury (HMT) and the Financial Conduct Authority (FCA), has taken the decision to sell Silicon Valley Bank UK Limited ('SVBUK'), the UK subsidiary of the US bank, to HSBC UK Bank Plc (HSBC)," the FCA confirmed the acquisition in the written statement.

Despite the recent developments, SVBUK retains its authorization from both the PRA and FCA and will continue to operate normally. The Bank of England and HM Treasury have assured that depositors' funds are secure as a result of the transaction.

Customers of SVBUK will retain their access to the Financial Services Compensation Scheme and Financial Ombudsman Service, while their consumer rights remain unchanged.

Regulators Resolve SBV's Crisis

The consequences of the fallout are significant for the technology industry, given the bank's exclusive focus on that sector. Circle, the stablecoin issuer, held $3.3 billion, or 8 percent of the funds supporting the USDC, at Silicon Valley Bank. The Federal Deposit Insurance Corporation (FDIC) only provides insurance for deposits up to $250,000, which puts Circle's stablecoin peg at risk.

However, in a joint statement issued on Sunday, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FDIC Chairman Martin Gruenberg assured Circle and other SVB depositors that they would have uninterrupted access to their funds on Monday, allowing them to carry out their operations smoothly.

In their regulatory press release, the government emphasized that its intervention in SVB will alleviate pressure on the financial system, maintain financial stability, and reduce any adverse effects on businesses, households, taxpayers, and the broader economy.