Last week, we experienced the second-biggest crash in US banking history since 2008 with the collapse of Silicon Valley Bank (SVB), a bank used by thousands of tech startups. The crash, understandably, sent panic waves throughout the global startup ecosystem, with plenty of concern in Europe about what would happen to startups dependent on the bank.
After 72 hours of talks between the UK government minister and the Bank of England, a rescue deal has been announced which will see HSBC buy the UK arm of SVB. The deal was announced early Monday morning before markets opened.
The deal, which will see HSBC acquire the UK Subsidiary for £1, means that customers of SVB UK will be able to access their deposits and banking services as normal from today. A degree of calm has been restored to the ecosystem as a result. The bank has a balance sheet worth £8.8 billion
UK Chancellor Jeremy Hunt said the deal “ensures customer deposits are protected and can bank as normal, with no taxpayer support”.
The purchase comes after the US Federal Reserve and Federal Deposit Insurance Corporation (FDIC) said on Sunday that depositors in the US would be fully protected. By purchasing SVB UK, HSBC has secured the deposits of more than 3,000 customers worth £6.7 billion.
Noel Quinn, HSBC group chief executive said that the deal “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”.
It’s reported that several other parties expressed interest, including the Bank of London.
The agreement, as well as the deal made in the US itself, reflect a moment of collaboration in the tech ecosystem, showing how players can pull together to create better outcomes for the long term.
It certainly brings a lot of reassurance to founders, entrepreneurs and investors across the tech space and means that startups will be able to make payroll and the most dramatic consequences of a bank collapse have so far been avoided.