HSBC on March 13 said it will take over the UK arm of failed Silicon Valley Bank, another move to avert a potential banking crisis.

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HSBC confirmed that its UK ring-fenced subsidiary, HSBC UK Bank, had agreed to acquire SVB UK for £1 ($1.21). The assets and liabilities of SVB UK’s parent company are excluded from the transaction, it said.

"As at 10 March 2023, SVB UK had loans of around £5 5bn and deposits of around £ 7bn. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88m. SVB UK's tangible equity is expected to be around £1.4bn. Final calculation of the gain arising from the acquisition will be provided in due course. The assets and liabilities of the parent companies of SVB UK are excluded from the transaction The transaction completes immediately. The acquisition will be funded from existing resources," HSBC said in a statement.

Also Read: What happened at the Silicon Valley Bank and why does it matter?

Noel Quinn, HSBC Group CEO, said the acquisition makes strategic sense for its business in the UK as it strengthens its commercial banking franchise and enhances ability to serve innovative and fast-growing firms, including in the technology and life- science sectors, in the UK and internationally.

HSBC will update shareholders on the acquisition at its 1Q 2023 results on 2 May 2023.

The development follows the dramatic collapse of the Silicon Valley Bank — the default bank for many high-flying startups and described as a linchpin of tech investing — roiled global markets, as it marked the largest bank failures since the 2008 global financial crisis.

The UK Treasury said in a statement that the sale, facilitated by the Bank of England in consultation with the Treasury, will protect the deposits of SVB UK clients.

Also Read: Everything we know about how the Fed is handling the SVB crisis

The comes a day after British Prime Minister Rishi Sunak said he recognised the "anxiety" over the SVB fallout but his government was working to find a solution that will secure customers' liquidity and cashflow needs. The country's finance minister Jeremy Hunt had said he was working with the PM and Bank of England Governor Andrew Bailey to "avoid or minimise damage" resulting from the chaos.

Also Read: These companies have deposits in Silicon Valley Bank. Check list here

Following HSBC's announcement today, British Finance Minister Jeremy Hunt said the deal “ensures customer deposits are protected and can bank as normal, with no taxpayer support.” “The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” he said.

Earlier in the day, US President Joe Biden also announced that depositors will have access to all their money starting March 13 and no losses associated with the resolution of the Silicon Valley Bank (SVB) would be borne by the taxpayer,

The joint statement issued by the Department of the Treasury, Federal Reserve, and FDIC, said, “This step will ensure that the US banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth.”

Also Read: Y Combinator estimates 1 lakh jobs within its community at risk due to SV Bank collapse

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First Published:Mar 13, 2023 1:18 PM IST