Silicon Valley Bank: What you need to know

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The UK branch of the bank, SVB UK, has been sold to HSBC for just £1 – again to safeguard customers. Many in the UK financial community will no-doubt be concerned about the SVB UK news as more than 3,000 companies could have been at risk of going under first thing on Monday morning. 

From predictions on investor response to whether or not HSBC will make the most of the acquisition, we have shared some of the key things that you should know.

How investors could respond to the SVB UK acquisition

There may be a contraction in capital deployment as investors focus on securing the future of portfolio companies depending on a fund or investor’s exposure to SVB.

There are still a lot of unknowns on how this acquisition will play out in practice.

The HSBC purchase could be good news for both customers and investors, as the impact of SVB could have been a lot worse and extended outside of firms that are with the bank. This is due to supply-chain issues which could crop up should firms have gone under, causing a ripple effect across industries.

Will HSBC capitalise on the acquisition?

HSBC will now acquire a lot of high-growth tech businesses as customers, and could really cement their brand as a supporter of UK innovation.

They could achieve this by replicating some of the hands-on support that SVB provided, such as competitive venture debt rates; sponsorship of key tech events and meet-ups; as well as educational support programmes.

However, they may also choose to purely retain the customers and effectively swallow SVB into their regular business banking practice. In which case, we will be missing a vital cog in the tech ecosystem and an important source of competitive capital.

As for investors with SVP UK accounts, HSBC has already assured the safety of deposits. However, the bank still needs to clarify how they will manage the other areas of SVB’s operations, namely the supply of competitive Venture Debt for growing companies.

Will the SVP collapse prompt a response from interest rate-setters in the US and UK?

Interest rate-setters may wish to avoid further piling on the pressure following the initial SVB news. Analysts were expecting a raise in interest rates by around 0.25%-0.5% last week. 

However, in a bid to temper the markets, changes may not come at the next review meeting on March 23. Or any increases could be at a slightly lower rate in order to avoid further instability across the global banking industry – although there will likely still be a rise in interest rates on both sides of the Atlantic.

The US Federal Reserve may go one step further and put a hold on an interest-rate decision all together as they are far more exposed to SVB than the UK market.