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Tipsheet

Oh, So That's How Much HSBC Paid to Take Over Silicon Valley Bank's UK Branch

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.

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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. 

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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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