New Owner HSBC Invests $2.1 Billion Into SVB UK
British banking giant HSBC is reportedly set to inject $2.1 billion into Silicon Valley Bank UK.
Bank officials told investors Monday (March 13) that HSBC was prepared to commit billions of pounds in liquidity to ensure the British arm of the failed American bank could conduct business as usual, Bloomberg News reported.
HSBC purchased SVB UK Monday for 1 pound on Monday, PYMNTS reported.
“This acquisition makes excellent strategic sense for our business in the U.K.,” Noel Quinn, HSBC Group CEO, said in a news release. “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 U.K. and internationally.”
SVB was taken over by the regulators last week following a run on deposits. It was the second-largest U.S. bank failure in history, and the first major bank to fold since the financial crisis of 2008. Its demise came just days after the crypto-focused lender Silvergate shut its doors, and two days before the government shut down Signature Bank.
According to Bloomberg, Quinn and HSBC UK Head Ian Stuart told investors they had no significant changes planned for how SVB UK will be run.
“We were hugely reassured,” Suzanne Ashman, general partner at venture investment firm LocalGlobe, told Bloomberg. “They don’t want to lose the DNA of what they bought.”
HSBC didn’t clarify whether it would run SVB as a standalone division or retain the Silicon Valley Bank brand, the report said.
As PYMNTS has noted, the bank’s collapse last week has shaken the venture capital (VC) and startup world that made up much of SVB’s customer base.
A recent report from The Information describes some of the short-term issues resulting from the bank’s failure, such as warnings of “operational hiccups,” and companies being forced to tap into Treasury bills and other securities.
In the long term, startups are also concerned about their ability to raise money in the future, as many investors banked at SVB.
In a speech Monday, President Joe Biden made it clear investors in SVB were not included in the government’s rescue plan.
“They knowingly took a risk and when the risk didn’t pay off, investors lose their money, that’s how capitalism works,” he said.
PYMNTS has also written that the downfall of SVB could lead VC firms to rethink the high valuations many startups have attained.
“After all, the VCs depend on returns on their investments and attracting new backing to keep their activities afloat,” the report said. “A chilling effect on investments would force the startups to seek new ways to keep their efforts and operations ongoing, which may spark deal-making in the form of mergers and acquisitions or outright sales.”