HSBC has stepped up as a white knight to rescue SVB’s distressed UK arm with a sale at rock bottom prices!
British banking giant HSBC Holdings announced today its acquisition of Silicon Valley Bank (SVB) UK arm. HSBC UK has agreed to buy the SVB London arm in a deal worth £1, equivalent to $1.21 at the press time.
A Screaming Deal
According to HSBC’s estimates, SVB UK’s loan portfolio includes around 5.5 billion GBP ($6.7 billion), while its deposits are about 6.7 billion GBP ($8.1 billion).
The UK bank reported a pre-tax profit of 88 million GBP ($107 million) for the previous year. HSBC expects SVB UK’s tangible equity to reach 1.4 billion GBP ($1.7 billion).
However, the British bank also noted that the “final calculation of the gain arising from the acquisition will be provided in due course.”
Speaking on the last-minute deal that saved the distressed bank, HSBC Group CEO Noel Quinn said:
“SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety, and security of HSBC.”
Good For Everyone
The Bank of England stated that all deposits with SVB UK are now protected following the deal.
The news came shortly after HSBC and JP Morgan were reportedly considering an offer to buy SVB. Upon HSBC’s deal confirmation, the UK companies associated with SVB are slightly relieved under shutdown pressure.
Regulators said on Sunday that they decided to shut down Signature Bank of New York amid mounting fears. Like Silvergate Bank, Signature Bank provides on-ramp services to several stablecoin issuers.
Its major clients include USD Coin, Paxos Standard, and TrueUSD. Apart from Paxos and TrueUSD, Coinbase confirmed that the company has around $240 million in funds on Signature Bank.
Coinbase historically worked with both Silvergate Bank and Signature Bank. Not long ago, the exchange announced it cut ties with Silvergate and switched to Signature to protect customers’ funds.
The fallout of Silicon Valley Bank (SVB) last Friday triggered a bank panic, urging authorities to take action in light of greater damages and upcoming ripple effects.
According to Sunday’s updates, the US Federal Reverse (Fed) announced a collaborative effort to resolve the current liquidity shortage.
The Crypto Market Reacts
Silvergate and Silicon Valley Bank’s collapse was primarily attributed to the risk and capital management issues. These banks faced a similar fate as traditional banks during a wave of bank runs.
Their clients, including CEX exchanges, VCs, and other crypto projects, faced financial risks and bankruptcy, resulting in a loss of confidence among bank users. Bank couldn’t have ready funds to cover the sudden, massive withdrawals.
Silicon Valley Bank undoubtedly sent shock waves to the crypto market. Following the bank’s collapse last week, the price of Bitcoin dipped below $20,000 and even reached $19,662 on March 10.
Stablecoin USDC of Circle, the company linked to SB, de-pegged while altcoins took a plunge.
The stablecoin market faced a period of instability when TerraUSD (UST) lost its peg and crashed in May 2022, leading to the collapse of the entire Luna ecosystem.
Earlier this year, Binance USD (BUSD), linked to the world’s largest cryptocurrency exchange Binance and issued by Paxos, experienced a significant outflow of funds last month due to increased US regulatory scrutiny.
However, the rally took place across the crypto market following the Fed’s announcement of the SVB bailout. USDC has recovered to near the $1 mark, while the flagship cryptocurrency has surged above $24,000. However, Circle has not confirmed whether it has recovered the remaining $3.3 billion from Silicon Valley Bank.
The ongoing rally suggests a crisis of trust in the banking system. As US bank stocks experience significant sell-offs from 40% to 80%, many investors are considering alternative assets such as cryptocurrencies or gold.