HSBC’s UK arm has agreed to buy the collapsed Silicon Valley Bank for just over $1, under a rushed and panicked deal facilitated by the UK government and the BoE.
In a statement on Monday, chief executive of HSBC Noel Quinn said:
“This acquisition makes excellent strategic sense for our business in the UK.”
The British government said customer deposits would be protected “with no taxpayer support.” In the statement, the spokesman said: “customers of SVB UK will be able to access their deposits and banking services as normal from today.”
In essence, this is a bail-in from within the global fractional reserve banking system. Tax payers store their money in these banks, which appear to be holding onto toxic liabilities. Bank runs would further threaten this fragile system.
Under the agreement terms, HSBC’s UK subsidiary will acquire Silicon Valley Bank UK Limited, which is expected to be completed instantly. The deal excludes all assets and liabilities of the parent company, SVB.
Despite government assurances, the lightning-speed nature of the deal indicates underlying issues within the legacy banking sector, and is akin to an internal ‘panic move’ to avoid further contagion.
The UK deal comes after the Biden administration moved to protect SVB customers from losses. The administration announced that depositors would have access to all their money on Monday morning, which meant approving an incredible intervention aimed at averting a 2008-style crisis.
Authorities are supposedly extending ‘protection’ to Signature bank depositors in New York in an attempt to quell the panic.
The British government, the Bank of England, and British financial regulators have been looking for a buyer for SVB’s UK subsidiary since Friday. UK tech. startups in particular found themselves in hot water during the collapse.
The UK’s finance minister Jeremy Hunt said the government “worked urgently to deliver” on a promise to “look after” the sector and the bank’s customers.
The Bank of England said it approved the sale “to stabilise SVBUK,” ensure “the continuity of banking services,” minimize “disruption to the UK technology sector” and bolster “confidence in the financial system.”
However, the rushed moves show clear underlying weakness in the global fractional reserve banking system amidst the highest interest-rate hike ever from the US Fed – an attempt to calm inflation. In other words, neither central banks, nor private banks are confident in the current financial state of affairs.
Silicon Valley Bank had over $209 billion in assets.