HSBC rescues Silicon Valley Bank UK after collapse of parent company
On 10th March 2023, Silicon Valley Bank collapsed marking the second-largest bank failure in the US after the 2008 financial crisis. Whether this is the start of a bigger banking meltdown is still unknown, but the effects of SVB’s downfall continue to be felt across global financial markets. And news is just in that Credit Suisse has been rescued by UBS in another deal.
In the UK, the Bank of England announced that the Silicon Valley Bank UK would be placed into an insolvency procedure causing panic across the 200+ organisations that had deposited with the bank.
That was on Friday, 10th March. By Monday at 7am, HSBC UK announced that it was buying SVB UK.
“If somebody had said to me [that] we would be acquiring another bank within two or three days, I wouldn’t have believed it,” Ian Stuart, CEO of HSBC UK Bank said noting that it all happened so fast.
“Woke up on Saturday morning, saw the announcement and by just after 10:30 a.m. we were in touch with the regulator offering our help, myself and our global CEO Noel Quinn both in contact. And it went a little bit quiet, I think at that point we were just trying to offer any assistance we could,” Stuart said.
Immediately after SVB UK had been declared insolvent, its customers wrote to the UK treasury asking for help. Their biggest fear was that without access to their SVB deposits, they couldn’t fulfil their financial obligations including funding the payroll.
Stuart says that they had about 5 hours to do their due diligence to determine if purchasing SVB UK was a smart decision.
HSBC was not the only financial institution interested in buying SVB UK. OakNorth Bank, The Bank of London and Abu Dhabi investment firm Royal Group were reportedly weighing their options.
“As far as we were concerned it was a competitive situation, and I can honestly tell that even up to about 10 or 11pm at night, I still thought it was a competitive situation,” Stuart says.
But, by the end of the night, the deal was closed and on Monday Morning HSBC announced that it was buying Silicon Valley Bank UK for £1 ($1.21 USD). The acquisition protected £6.7 billion in deposits.
“We have a UK bank that’s well run, very good people, good quality products and, yes, five hours isn’t a lot of time to do due diligence, but what we decided was, ‘Are there any black holes? No, not that we could see,’” Stuart said.
On whether the purchase is worth the gamble, Stuart said it was a wonderful opportunity and that it would help HSBC accelerate its strategic plan by two or three years.
And as we publish this article, yet another major bank has just been rescued. Credit Suisse, the troubled Swiss investment bank, has also been saved from oblivion, by Switzerland's largest bank UBS, to avoid any more turmoil in the banking world, by buying Credit Suisse for £2bn (£1.64bn). Meetings have been taking place in Bern today, between the Federal Council, the Swiss National Bank, UBS and Credit Suisse to agree the future of the troubled bank.
If Credit Suisse had been allowed to fail, the bankruptcy of a globally important bank, would have caused unknown economic unrest within the entire Swiss banking community and throughout the banking world. Switzerland had to shore up it banking foundations and make sure the country remained a premier banking nation and the purchase of Credit Suisse by UBS was a signal to the world of greater banking stability both in Switzerland and internationally.