Silicon Valley Bank collapses, the market shakes and HSBC Holdings runs to help.
This is the situation investors and experts have been in since last Friday. Recent news tells us that HSBC Holdings has now agreed to acquire SVB for £1.
In addition, crypto exchange Coinbase recently claimed to hold $240 million of Signature Bank, which also collapsed. Below are the details.
HSBC Holdings buys Silicon Valley Bank
The banking industry is in dire straits due to the consecutive collapses of Silvergate, Silicon Valley Bank and Signature Bank. However, with the entry of regulators, customers have been relieved to some extent.
In fact, today, British Chancellor Jeremy Hunt confirmed the acquisition of Silicon Valley Bank’s U.K. business by HSBC. The news is also reported on Twitter by the Watcher.Guru account:
JUST IN: 🇬🇧 HSBC Holdings agrees to acquire Silicon Valley Bank UK for £1.
— Watcher.Guru (@WatcherGuru) March 13, 2023
So, HSBC UK Bank acquired the UK branch of SVB for 1 pound. This translates to approximately $1.21. The sale was facilitated by the Bank of England in consultation with the UK Treasury.
A recent Reuters report highlighted that SVB UK is “separate” from the U.S. group. HSBC also clarified that the assets and liabilities of the parent company were excluded from the transaction.
Specifically, SVB UK had loans totaling 5.5 billion pounds and deposits worth about 6.7 billion pounds. In addition, the Bank of England said SVB UK had a total balance sheet size of about 8.8 billion pounds.
In any case, on this issue Hunt said that deposits will be protected without taxpayer support. He added the following:
This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC
Deposits will be protected, with no taxpayer support
I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise
— Jeremy Hunt (@Jeremy_Hunt) March 13, 2023
Commenting on the latest sale, CEO Noel Quinn said the following:
“This acquisition makes excellent strategic sense for our UK business. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing companies, including in the technology and life sciences sectors, in the UK and internationally.”
In addition, he said that SBV UK customers can continue banking as usual and confirmed that their deposits are guaranteed by HSBC.
Coinbase involved with Signature Bank failure
New York financial regulators closed Signature Bank on Sunday. Customers, however, will be bailed out by the U.S. Treasury, the Federal Reserve and the Financial Deposit Insurance Corporation.
Specifically, today all depositors will have access to their funds. Now, according to the latest disclosure on Twitter, Coinbase holds $240 million in the now collapsed financial institution. As one reads:
JUST IN: Coinbase $COIN says it holds $240 million in now-collapsed Signature bank.
— Watcher.Guru (@WatcherGuru) March 12, 2023
Regardless, Coinbase continued to assure users that the capital fund “continues to be protected” by FIDC pass-through insurance. Currently, however, the bank facilitates customer cash transactions through other banking partners.
The exchange went on to explain that it plans to “fully recover” funds worth $240 million from the bank. In addition to preserving funds from cryptocurrency companies, Signature Bank has also facilitated payments between clients such as hedge funds and exchanges.
Transactions were key to maintaining liquidity. In addition, the bank also operated Signet, a payment network that encouraged cryptocurrency business customers to make real-time payments around the clock.
Coinbase, for its part, integrated Signet to help customers quickly transfer funds in October last year. As of March 8, the bank reportedly held about $16.5 billion in customer deposits related to cryptocurrencies.
Due to the collapse of Signature Bank and the Silicon Valley bank, regulatory authorities have intensified. The New York Department of Financial Services is reportedly in
“close contact with all regulated entities.”
It is, in fact, keeping an eye on and analyzing market trends and working closely with other state and federal regulators to protect consumers.
The grave consequences of SVB’s collapse
The BBC reported that the collapse of Silicon Valley Bank has left more than 200 British companies unable to pay their staff. In addition, the report said the government is working to protect and stabilize British tech companies affected by the SVB collapse.
The country’s treasury said it wanted to minimize the damage to some of our most promising companies in the UK after last week’s crash. In addition, the report noted that companies could start experiencing problems by Monday morning if they are left without assistance.
The last week has seen headlines dominated by the collapse of SVB Financial. Specifically, a banking failure that is the largest since the 2008 financial crisis.
As a result, creating a situation where the entire financial sector is concerned about potential exposure. Now, the exposure is also affecting industries abroad. In contrast, the government is currently working on a plan to protect British technology companies from the consequences of the shutdown.
Prime Minister Rishi Sunak, Chancellor Jeremy Hunt and Bank of England Governor Andrew Bailey worked through the night to address the issue. In addition, the three “worked all weekend to find a solution,” on the effect the shutdown could have on the country’s industries.
In contrast, while the U.K. financial industry is not affected, there is a serious risk to some of the most promising companies in technology and life sciences, Hunt said.