California-based Silicon Valley Bank (SVB) has collapsed in the biggest bank failure since 2008, prompting HSBC to buy the bank's UK arm for just £1 in a battle to protect UK technology companies from the consequences.
The collapse of SVB, which primarily served startups, venture capitalists and others in the US tech ecosystem, began on March 8, 2023, when the parent company announced that it had sold $21 billion in securities from its portfolio, with a loss of $1.8 billion. . It will sell another $2.25 billion in new shares to shore up its finances in the face of rapidly rising interest rates.
This led to customers starting to withdraw money en masse, prompting regulators to shut down the bank two days later on March 10.
Then, the Bank of England ordered SVB's British subsidiary into bankruptcy the same night, putting British tech companies at risk of losing almost all of their money.
The next day, more than 200 UK technology company directors wrote an open letter to the Treasury (His Majesty the Treasury) calling for immediate government intervention.
He said: “The businesses affected by the collapse of SVB serve millions of people in the UK alongside businesses that are vital to our economy.” “The cost of inaction here means that these companies may fail in the short term, and their technological growth ambitions will fail in the long term.”
in Publication statement On March 12, the UK Treasury said it was treating the sudden collapse of SVB Bank as a “high priority” and that it was “working at an accelerated pace on a solution to avoid or minimize damage to some of our most promising UK businesses”, and we will do so. Provide immediate plans to ensure the operational and short-term cash flow needs of Silicon Valley Bank's UK clients are met.
To protect the finances of SVB UK's approximately 3,500 customers, the UK government reached a last-minute agreement with the Bank of England later that night to facilitate the private sale of the UK branch to HSBC, which reportedly paid just £1.
“The UK’s technology sector is truly world-leading and is hugely important to the UK economy, supporting hundreds of thousands of jobs. Chancellor Jeremy Hunt said: “I said yesterday that we would look after our technology sector, and we have worked urgently to deliver on that promise and find a solution that gives confidence to customers.” SVB in the UK.
“Today, the Government and the Bank of England have facilitated a private sale of Silicon Valley Bank in the UK. This ensures that customers’ deposits are protected and they can bank as normal, without taxpayer support. I am pleased that we have reached a decision in such a short time.
“HSBC is the largest bank in Europe, and SVB’s UK customers should feel reassured by the strength, security and protection it offers them.”
Dom Hallas, CEO of startup lobby group Codec, He said“The government deserves huge praise from above, to Her Majesty's Treasury who have understood and met the challenge, and to the large number of civil servants who may not have slept since Friday… There are hundreds of founders across the country who will do just that.” We appreciate your business.”
TechUK CEO Julian David added that without the HSBC rescue buyout, many UK startups would not have been able to access their deposits, which in turn would have left many of them facing bankruptcy.
“It has been a turbulent time for technology in the UK following a difficult economic backdrop throughout 2022 with companies facing many adjustments to business models. But it also remains a place of opportunity, and as an engine of growth in the UK, it has the potential to address the challenges we face in the UK.” United.
“So it is very encouraging to see, from the highest levels of government, including the Prime Minister and the Chancellor, as well as the new Department of Science and Technology, this commitment to technology and our business and to see them demonstrate the speed at which we are achieving.” “We need to allow it to become the science and technology superpower we all want it to be,” Julian David added.
Rob Cousens, CEO of AI-powered data platform Scribe, said HSBC's purchase of SVB UK was an “excellent outcome” for the UK technology sector: Stakeholders appreciated the importance of protecting deposit holders in the UK's most innovative sector. Founders who appeared unable to pay their salaries this week are now protected and thousands of jobs have been saved.
Jukka Vääänänen, CEO of free PR platform Newspage, which UK startups use to gain visibility rather than expensive marketing budgets and agencies, said that although the crisis appears to have been averted for now, there will be tech banks. Others affected by interest. Rising prices.
“Once again questions arise about risk management in the banking sector,” Vääänänen said. “The collapse of SVB will increase fear among technology companies and startups, and fear hinders growth.” [y el crecimiento] “This is what the economy desperately needs right now.”
About the author: Sebastian Kluvig-Skelton is the UK correspondent for Computer Weekly. He joined the site in October 2018 to cover technology startups. Klovig studied history at Queen Mary University and completed a master's degree in investigative journalism at City University.
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