Silicon Valley Bank’s UK branch is under new
management. While reportedly a separate entity, walled off from the
calamities of its US-based operations, it’s not a barrier impervious to
the fallout that comes from a total collapse. In the US, SVB closed its
doors and is under the direction of the FDIC. This news comes after a
run occurred, sparked by the bank’s announcement that they needed a
massive capital raise to cover the mountains of losses incurred by the
tech industry’s drumming on Wall Street; SVB was leveraged heavily in
this sector. It was where startups went and got their loans. There was
also no risk assessment officer for months here.
Across the pond, they did hire one,
but she was more concerned about creating safe spaces, pushing LGBT
events, and promoting a ‘woke’ ethos than doing her job. They might as
well not have hired one. It’s irrelevant now since HSBC paid a whopping
one pound to purchase the SVB’s UK subsidiary earlier this week (via CNBC):
HSBC
on Monday announced a deal to buy the U.K. subsidiary of collapsed U.S.
tech startup lender Silicon Valley Bank, following all-night talks.
HSBC
confirmed that its U.K. ring-fenced subsidiary, HSBC UK Bank, had
agreed to acquire SVB U.K. for £1 ($1.21). The assets and liabilities of
SVB U.K.’s parent company are excluded from the transaction.
The
acquisition “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,”
said HSBC Group CEO Noel Quinn.
“SVB U.K. customers can continue
to bank as usual, safe in the knowledge that their deposits are backed
by the strength, safety and security of HSBC.”
[…]
The
sale, facilitated by the Bank of England in consultation with the U.K.
Treasury, will protect the deposits of SVB U.K. clients, the Treasury
said in a statement.
Shares of HSBC provisionally closed 4.1% lower on Monday.
British
Finance Minister Jeremy Hunt stressed that the deal “ensures customer
deposits are protected and can bank as normal, with no taxpayer
support.”
“The U.K.’s tech sector is genuinely world-leading and
of huge importance to the British economy, supporting hundreds of
thousands of jobs,” he added.
Hunt had on Sunday said that the
U.K. administration and the Bank of England were working to “avoid or
minimize” potential damage resulting from the U.K. branch of SVB.
In
parallel, U.S. regulators on Sunday approved plans to backstop
depositors and financial institutions linked with U.S. parent company
SVB.
It must be nice to be reckless with money and other people’s money
and know the government will bail you out. And people wonder why the
kernels of populism keep being planted in the political landscape. Maybe
stop doling out loans so heavily to an industry that’s become the
textbook definition of volatility, exposing the entire institution to
immense risk.
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