HSBC, a bank that provides a comprehensive range of financial services, declared on Monday its acquisition of the UK subsidiary of Silicon Valley Bank (SVB) for 1 pound. Europe’s biggest bank announced the acquisition, saying the deal would be effective “immediately.”
The announcement comes days after US authorities ordered Silicon Valley Bank to cease operations on March 10, causing panic in crypto markets due to some major crypto companies, such as Circle and Coinbase, having significant exposure to the bank.
According to an HSBC statement, SVB UK had incurred loans of around 5.5bn Pounds and deposits of about 6.7bn Pounds. According to the financial year ending 31st December 2022, SVB UK recorded a profit before tax of £88m, even though its tangible equity is expected to be around £1.4bn. For this reason, the final calculation of the consequent gain from the acquisition will be provided in due course.
However, the assets and liabilities of the parent companies of SVB UK are excluded from the transaction. In other words, the transaction is finalized, and the acquisition would be funded from existing resources.
The CEO of the financial institution, Noel Quinn, said, “This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve for innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.”
In addition to his statement, he added that the Silicon Valley Bank UK customers are welcome to HSBC. Because of this, the country anticipates how to help achieve growth within and outside the United Kingdom.
“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”, said Noel Quinn.
US government says SVB depositors would be able to access their funds
The US government has stepped into the SVB situation by assuring people with funds deposited at SVB would be able to access their funds and that those with money in the bank would have full access as of Monday, CNBC reports
The Federal Reserve announced the establishment of a new Bank Term Funding Program to protect institutions affected by the market instability caused by the SVB failure.
Also, a joint statement from the various regulators said no bailouts and taxpayer costs would be associated with any new plans. Shareholders and some unsecured creditors will not be protected and will lose all their investments.
“Today we are taking decisive actions to protect the U.S. economy by strengthening public confidence in our banking system,” said a joint statement from Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and FDIC Chair Martin Gruenberg.
The Fed facility will make one-year loans available to banks, savings associations, credit unions, and other institutions. Those who use the facility will be required to pledge high-quality collateral such as Treasury bills, agency debt, and mortgage-backed securities.
President Joe Biden praised Sunday’s initiatives but warned that the crisis would have consequences.
“I am firmly committed to fully holding those responsible for this mess accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we do not find ourselves in this position again,” Biden said.
A senior Treasury official said on Sunday evening that a sale of Silicon Valley Bank is still possible. The initiatives taken on Sunday were designed to avert further potential problems.
Read More; USDC hits all-time low following Silicon Valley Bank collapse
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