HSBC set to seal deal to buy Silicon Valley Bank’s UK unit

British ministers and the Bank of England were racing on Monday morning to conclude a private sale of Silicon Valley Bank’s UK arm to HSBC before markets opened.

People briefed on the negotiations said potential bidders held conference calls with the BoE through the night.

By 6am, HSBC had emerged as the leading white-knight bidder for SVB UK, with Noel Quinn, the bank’s chief executive, involved in the overnight talks.

A sale of the stricken bank is the preferred choice of Jeremy Hunt, UK chancellor, since it would hopefully avoid the government having to make a big intervention to protect depositors.

The extraordinary overnight rescue mission involved UK prime minister Rishi Sunak, Hunt and City minister Andrew Griffith, while Andrew Bailey, Bank of England governor, and Sam Woods of the Prudential Regulation Authority were also involved.

One person briefed on the haggling over the future of SVB UK said it was a “fully competitive” process with multiple parties interested in taking over the stricken bank. Sunak, in California for a defense summit with leaders of the US and Australia, was said to have been “very hands on” overnight.

Hunt said on Sunday there was “a serious risk” to tech and life sciences companies that used SVB’s UK bank, with senior founders warning of “carnage” if they were unable to pay wages and bills in the coming week.

The government spent the weekend racing to try to sell SVB UK and put together a back-up plan to support companies that have deposits trapped in the lender. US regulators on Sunday evening said that SVB’s American depositors would have access to all of their money on Monday.

Several people familiar with the UK government’s attempts to broker a sale said a Middle Eastern buyer was one of the leading bidders, in a move reminiscent of rescues after the 2008 financial crisis.

Rothschild is leading the process to find a potential buyer for the British entity. Rothschild declined to comment.

British banks OakNorth and the Bank of London also submitted bids, with the latter leading a consortium that includes private equity groups, according to people familiar with the matter.

JPMorgan and HSBC were also asked on Sunday night to study potential bids for SVB UK, according to people familiar with the matter. JPMorgan and HSBC declined to comment.

Hours after regulators shuttered California-based SVB on Friday, in the biggest US bank failure since 2008, the BoE announced it would have to put the group’s separate UK banking unit into insolvency, sparking the weekend sales process.

If a sale cannot be brokered, Hunt has ruled out a bailout of the UK arm and is instead focusing on keeping cash flowing to tech groups.

Government officials and regulators spent the weekend working on a backup rescue plan to provide guarantees for banks to offer new loans to companies with money locked in SVB accounts.

If implemented, the scheme would be overseen by the state-backed British Business Bank, according to multiple people familiar with the talks.

The Financial Conduct Authority has spoken to banks about taking part in the scheme, according to one person familiar with the discussions, and has told them they can take on clients quickly without fulfilling the usual rules on customer due diligence since those clients will have already passed SVB’s onboarding processes, which the FCA has reviewed and did not find any issues with.

However, government officials said that scheme was not finalized and a number of details had to be thrashed out before markets opened on Monday morning.

“There are a wide range of options being looked at,” said one Treasury insider, adding that a sale of the UK bank was the preferred outcome.

SVB UK has 3,300 UK clients, including start-ups, venture-backed companies and funds, according to people familiar with the bank, although many have deposits under the £85,000 threshold covered by the financial insurance scheme.

The UK government said in December that the country was home to “over 85,000 start-ups and scale-ups”.

Asked if he would guarantee 100 per cent of deposits, Hunt told the BBC’s Laura Kuenssberg: “We want to find a way that minimises — or if we possibly can — avoids all losses to these incredibly promising companies.”

Sunak repeated the BoE’s assertion that the collapse of SVB’s UK bank did not present “a systemic contagion risk”.

But he told reporters ahead of a UK, US and Australia defense summit: “We’re working to recognize the anxiety and the concerns customers of the bank have and making sure we can work to find a solution that secures people’s operational liquidity and cash- flow needs.”

He said the Treasury was working “at pace” to deliver a plan. Asked if he was satisfied BoE governor Bailey was overseeing a robust regulatory environment for UK banks, Sunak replied: “Yes.”

Additional reporting by Stephen Morris, Ivan Levingston, Michael O’Dwyer, Emma Dunkley and Anjli Raval

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