Sale of SVB UK ‘minimises disruption to British tech,’ says Bank of England
The British tech sector can rest a little easier tonight after the UK arm of Silicon Valley Bank (SVB) was sold to HSBC for just £1.
The intervention followed last week’s collapse of the subsidiary’s California-based parent company. The Bank of England (BoE) intervened over fears that mass withdrawals in the US would spread to the UK business.
Many of SVB UK’s 3,300 customers, which include numerous VC investors and startups, warned they would go bust if their deposits were lost. The BoE had initially planned to put the bank into insolvency, which would have only guaranteed protection for deposits worth up to £85,000, or £170,000 for joint accounts.
The deal with HSBC supersedes the insolvency plan. Customer deposits can now be protected without requiring taxpayer support.
“This action has been taken to stabilise SVB UK, ensuring the continuity of banking services, minimising disruption to the UK technology sector, and supporting confidence in the financial system,” the BoE said in a statement.
After the deal was announced, SVB UK said it was resuming normal operations.
Following the announcement that @HSBC_UK has acquired SVB UK, we’re resuming normal operations from today. Our clients should not notice any significant changes, however, there may be short delays across the next few days as we return to business as usual. Thanks for the support
— Silicon Valley Bank UK (@SVB_UK) March 13, 2023
TechUK, an industry lobby group, said the sale will be a relief for the British tech ecosystem.
“Without access to their deposits these companies faced the prospect of not being able to pay staff or rent or suppliers — in short many would also be facing insolvency and the many thousands of people working in this part of the tech sector would be very worried about their jobs!” said techUK CEO Julian David.
For HSCB, the acquisition of all SVB UK’s assets for a nominal £1 could be an extremely good deal. The Bank of London, which had also submitted a rescue bid, described the sale as a “missed opportunity.”
“It cannot be right that once again the heritage banks that have provided a poor service to UK entrepreneurs over many years benefit from their already dominant position,” the clearing bank said in a statement.
A statement from @thebankoflondon regarding @SVB_UK (Silicon Valley Bank UK Limited) – 7:08AM London, March 13 2023. pic.twitter.com/c6gFHucWSI
— The Bank of London (@thebankoflondon) March 13, 2023
Legal experts are already pointing to the lessons for startups. Charles Fletcher, a partner at law firm Mishcon de Reya, recommended several steps that businesses can take to avoid the risks that SVB UK has exposed.
“Key actions include keeping corporate accounts with more than one bank, having an emergency funding plan to avoid cashflow squeezes, separating funds from different sources and taking a strategic approach to managing currencies,” said Fletcher.
“These should accompany fundamental business planning and management steps, such as a detailed risk register and crisis management protocols.”