Relief in the UK over Silicon Valley Bank. Panic in the US
T he good news is that it took only a long weekend to find a fix – a good one – for the UK end of the doomed Silicon Valley Bank. Our tech executives can stop writing emotional pleas to the chancellor about their unique importance to the nation’s prosperity. The bad news is that US regulators’ solution for the very much larger parent bank raised more questions than it answered. The fall-out from the failure of SVB, plus the closure of Signature Bank, could get a lot worse yet.
Let’s start with the positive, though. The sale of SVB’s UK subsidiary to HSBC for £1 is satisfactory from almost every angle. The customers will pass to Europe’s biggest bank, a haven they might have chosen before their cash was trapped at the end of last week. They now have immediate access to their money. The Treasury will be delighted that it has avoided putting public funds at risk. The likely plan B, involving lines of credit to the SVB UK’s customers, sounded horribly messy.
And for the Bank of England, the ending is excellent advertising. The post-crash regulatory reforms imposed tougher capitalisation requirements on the UK subsidiaries of foreign banks and – in this instance – they seem to have worked.
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We don’t know if the governor had to twist HSBC’s arm, but perhaps he didn’t: for its single pound, the buyer said it is getting a UK banking operation with tangible equity expected to be about £1.4bn. The figure is subject to adjustment but for HSBC – for whom SVB UK’s loans of £5.5bn and deposits of £6.7bn are a drop in the ocean – it’s worth a punt. This is not like Lloyds TSB shooting
Read more on theguardian.com
