HSBC buys SVB UK unit after frantic overnight talks

HSBC has bought the UK arm of stricken Silicon Valley Bank for a nominal £1, the Asia-focused bank said on Monday after a night of frantic negotiations involving government ministers and Bank of England officials.

Talks took place over the weekend on a private sale of SVB UK and a plan to help depositors in the lender in an effort to avoid a state bailout. US regulators on Sunday evening said that SVB’s American depositors would have access to all of their money on Monday.

However, financial markets remained sceptical that the fallout had been contained, with Britain's FTSE 100 Index down by nearly another 2% on Monday despite the co-ordinated action and Europe's pan-regional Stoxx 600 off by 2.5%.

"This acquisition makes excellent strategic sense for our business in the UK. 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 UK and internationally,” said HSBC chief executive Noel Quinn.

SVB UK had around £6.7bn of deposits and loans of about £5.5bn as at Friday last week, while its balance sheet stood at £8.8bn, according to the Bank of England.

But it added that the “scale of the deterioration of liquidity and confidence means that, in the view of the Bank and the Prudential Regulation Authority, the position was not recoverable”.

The collapse of SVB's US-listed parent company, now under government control, is one of the biggest since malfeasance by global banks caused the financial crisis of 2008, leading to bailouts of the sector around the world, much to the anger of taxpayers.

In the UK, the government took major stakes in Lloyds and Royal Bank Of Scotland (now NatWest). No British banker was ever charged for their role in the crisis. Globally, 47 people were sentenced, the majority in Iceland and Spain, according to research conducted by the Financial Times.

Reporting by Frank Prenesti for Sharecast.com