The UK 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 the collapse of the subsidiary’s California-based parent last week. The Bank of England (BoE) intervened amid fears that bulk withdrawals in the US would spill over into UK business.
Many of SVB UK’s 3,300 clients, including numerous VC investors and startups, warned they would go broke if their deposits were lost. The BoE had initially planned to bankrupt the bank, which would only have guaranteed protection for deposits up to £85,000 or £170,000 for joint accounts.
The deal with HSBC replaces the bankruptcy plan. Customer deposits can now be protected without the need for taxpayer assistance.
“This measure was taken to stabilize SVB UK, ensure continuity of banking services, minimize disruption in the UK tech sector and boost confidence in the financial system,” the BoE said in a statement.
After announcing the deal, SVB UK said it would resume normal operations.
We are resuming normal operations from today following the announcement that @HSBC_UK has taken over SVB UK. Our customers shouldn’t notice any significant changes, however there may be brief delays over the next few days as we return to normal business operations. Thanks for the support
— Silicon Valley Bank UK (@SVB_UK) March 13, 2023
TechUK, a industry lobby group, said the sale will be a relief to the UK tech ecosystem.
“Without access to their deposits, these companies would face the prospect of not being able to pay staff, rent or suppliers – in short, many would also face bankruptcy and the many thousands of people who work in this part of the technology sector would be very concerned their jobs!” said techUK CEO Julian David.
For HSCB, acquiring all of SVB UK’s assets for a nominal £1 could be an extremely good deal. The The Bank of London, which had also made a bailout offer, described the sale as a “missed opportunity”.
“It cannot be right that traditional banks, which have provided poor service to UK entrepreneurs for many years, are once again capitalizing on 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 13 March 2023. pic.twitter.com/c6gFHucWSI
— The Bank of London (@thebankoflondon) March 13, 2023
Legal experts are already pointing out the lessons for startups. Charles Fletcher, partner at law firm Mishcon de Reya, recommended several steps companies can take to avoid the risks SVB UK faces.
“Key measures include maintaining corporate accounts with more than one bank, having a contingency funding plan to avoid liquidity shortages, segregating funds from different sources, and taking a strategic approach to managing currencies,” Fletcher said.
“These should accompany basic business planning and management steps, such as a detailed risk register and crisis management protocols.”