Silicon Valley Bank is no more, HSBC buys UK branch for £1

The USA’s 16th largest bank, Silicon Valley Bank (SVB), collapsed on 10th March 2023. It was known as the largest bank in Silicon Valley, the technology industry’s biggest lender and has now become responsible for the largest bank failure since 2008.

The collapse happened after concerns about the bank’s solvency which triggered a bank run.

On 8th March the bank announced that it sold off some of its assets at a $2 billion (€1.86 billion) loss, which caused investors and depositors to panic and led to the bank’s stock value dropping by 60 per cent by 9th March.

By 10th March, the bank failed to raise further capital, which led to the US Federal Deposit Insurance Corporation (FDIC) taking over control of customers’ deposits.

The main reasons attributed to the bank’s failure were the rising interest rates, declining venture capital, and also because the bank invested a significant share of customer funds in bonds and risky mortgage-backed securities (similar to what triggered the 2008 financial crisis).

To prevent contagion and shore up confidence in the banking sector, the FDIC told depositors that they would have access to all the money they have saved in the collapsed bank, even if it exceeded the $250,000 deposit guarantee (€233,405).

What’s next?

The FDIC will begin an auction of the bank’s assets according to reports, which will be sold off to assets to the highest bidder.

HSBC has already agreed to acquire the UK branch of SVB for £1 (€1.13) according to BBC. Reportedly, between 30 to 40 per cent of UK start-ups were at risk of being affected by the bank’s collapse which employed up to 50,000 people.

Other major banks within the USA and across the world will likely continue scooping up the remaining assets of the bank.