by British ministers and the Bank of England raced Monday morning to complete a private sale of Silicon Valley Bank’s UK branch to HSBC ahead of the opening of markets.
Those briefed on the negotiations said that potential bidders had been holding teleconferences with the BoE throughout the night.
At 6am, HSBC emerged as the leading white knight bidder for SVB UK, with Noel Quinn, the bank’s chief executive, involved in late-night talks.
The sale of the crisis-stricken bank is the preferred choice of UK Chancellor Jeremy Hunt, as it will hopefully keep the government from having to make major interventions to protect depositors.
The emergency overnight rescue mission was attended by UK Prime Minister Rishi Sunak, Hunt and City Minister Andrew Griffith, as well as Andrew Bailey, Governor of the Bank of England and Sam Woods of the Prudential Regulation Authority.
One person briefed on haggling over the future of SVB UK said it was a “fully competitive” process with multiple parties interested in taking over the affected bank. Sunak being in California for a defense summit with US and Australian leaders is said to have been “very hands-on” overnight.
Hunt said on Sunday there was a “serious risk” for tech and life sciences companies that used Britain’s SVB bank, with senior founders warning of “slaughter” if they couldn’t pay salaries and bills in the coming week.
The government has spent the weekend racing to try to sell SVB UK and come up with a contingency plan to support companies that have deposits trapped in a lender. US regulators on Sunday night said US SVB depositors will have access to all their money on Monday.
Several people familiar with the UK government’s attempts to broker a sale said one of the leading bidders was a Middle Eastern buyer, reminiscent of a bailout after the 2008 financial crisis.
Rothschild is in the process of finding a potential buyer for the British entity. Rothschild declined to comment.
Bids have also been submitted by British banks OakNorth and Bank of London, 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 evening to explore potential bids for SVB UK, according to people familiar with the matter. JPMorgan and HSBC declined to comment.
Hours after regulators shut down California-based SVB on Friday in the largest U.S. bank collapse since 2008, the BoE announced it would have to put the group’s separate UK banking unit into insolvency, kicking off a weekend sale process.
If the sale cannot be brokered, Hunt has ruled out bailing out 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 bailout plan to provide guarantees for banks to offer new loans to companies with money blocked in SVB accounts.
According to many people familiar with the talks, if implemented, the scheme would be overseen by the state-backed British Business Bank.
The Financial Supervisory Authority spoke to banks about participating in the scheme, according to one person familiar with the discussions, and told them that they could quickly accept customers without complying with the usual customer due diligence rules, as these customers had already gone through SVB implementation processes that had been vetted by FCA and found no problems with them.
However, government officials said the plan had not been finalized and many details had to be worked out before markets opened on Monday morning.
“A wide range of options are being considered,” said one Treasury insider, adding that the preferred solution was to sell the British bank.
According to people familiar with the bank, SVB UK has 3,300 customers in the UK, including start-ups, companies and venture-backed funds, although many have deposits below the £85,000 threshold covered by the financial insurance scheme.
The UK government said in December that there were “more than 85,000 start-ups and scale-ups” operating in the country.
Asked if he would guarantee 100 per cent of deposits, Hunt told the BBC’s Laura Kuenssberg: “We want to find a way to minimize – or if possible avoid – all losses for these incredibly promising companies.”
Sunak reiterated the BoE’s claim that the collapse of UK bank SVB did not pose a “systemic contagion risk”.
But he told reporters ahead of the UK, US and Australia defense summit: “We are working to identify the anxieties and concerns of the bank’s customers and make sure we can work to find a solution that will safeguard people’s operational liquidity and cash – flow needs.”
He said the Treasury was working “at pace” to implement the plan. Asked if he was pleased that BoE Governor Bailey oversaw a robust regulatory environment for UK banks, Sunak replied: “Yes.”
Additional reporting by Stephen Morris, Ivan Levingston, Michael O’Dwyer, Emma Dunkley and Anjla Raval
