Statement
The Bank of England (Bank), in consultation with the Prudential Regulation Authority (PRA), HM Treasury (HMT) and the Financial Conduct Authority (FCA), has taken the decision to sell Silicon Valley Bank UK Limited (‘SVBUK’), the UK subsidiary of the US bank, to HSBC UK Bank Plc (HSBC). HSBC is authorised and supervised by the PRA and the FCA. This action has been taken to stabilise SVBUK, ensuring the continuity of banking services, minimising disruption to the UK technology sector and supporting confidence in the financial system.
The Bank and HMT can confirm that all depositors’ money with SVBUK is safe and secure as a result of this transaction. SVBUK’s business will continue to be operated normally by SVBUK. All services will continue to operate as normal and customers should not notice any changes.
Customers can continue to contact SVBUK through the usual channels and borrowers should make any loan repayments to SVBUK as normal. SVBUK staff remain employed by SVBUK, and SVBUK continues to be a PRA/FCA authorised bank.
Today’s announcement supersedes the Bank’s 10 March statement that, absent any meaningful further information, it intended to apply to the Court to place SVBUK into a Bank Insolvency Procedure. Given the emergence of a credible purchaser for SVBUK the Bank has determined that using its resolution powers for stabilising failing banks is appropriate.
No other UK banks are directly materially affected by these actions, or by the resolution of SVBUK’s US parent bank. The wider UK banking system remains safe, sound, and well capitalised.
Notes to editors
1. The Bank’s resolution powers are designed to protect and enhance UK financial stability, ensure the continuity of banking services, protect public funds and impose losses on investors in failed banks. At the point of failure, SVBUK had a total balance sheet size of approximately £8.8bn, and a deposit base of approximately £6.7bn. However, the scale of the deterioration of liquidity and confidence means that in the view of the Bank and the PRA the position was not recoverable. Therefore, the Bank of England decided, in consultation with HMT, PRA and FCA, to use the resolution powers for stabilising failing banks that were brought in following the financial crisis.
2. Transfer to a Private Sector Purchaser involves the transfer of all, or part, of a bank’s business which can include either its shares or its property (its assets and liabilities), to a willing and appropriately authorised private sector purchaser without need for consent of the failed bank, or its shareholders, customers or counterparties.
3. The Banking Act 2009 created a Special Resolution Regime (SRR) which gives
HM Treasury and the Bank of England tools for dealing with distressed UK banks and building societies. When using or considering the use of these tools, the relevant authority must have regard to the following special resolution objectives set out in the Banking Act 2009:
- Ensure continuity of banking services in the United Kingdom and of critical functions.
- Protect and enhance the stability of the financial system of the United Kingdom.
- Protect and enhance public confidence in the stability of the financial system of the United Kingdom.
- Protect public funds, including by minimising reliance on extraordinary public financial support.
- Protect depositors and investors covered by the FSCS.
- Protect, where relevant, client assets.
- Avoid interfering with property rights in contravention of a Convention right (within the meaning of the Human Rights Act 1998).
4. These objectives are not ranked in the Banking Act 2009. The relative weighting and balancing of objectives will vary according to the particular circumstances of each failure, including both: (a) circumstances specific to the distressed firm; and (b) general circumstances relating to the wider financial system. Further information about the SRR is available on the Bank of England’s website.
5. The SRR tools under the Act comprise:
- Placing the whole of the bank or building society into the bank insolvency procedure (or building society insolvency procedure), which facilitates a rapid pay out by the FSCS to eligible depositors, or the transfer of their deposits.
- Five stabilisation powers: transfer to a private sector purchaser; transfer to a bridge bank; transfer to an asset management vehicle; bail-in; temporary public ownership. These stabilisation tools are exercised through the use of the Bank of England’s stabilisation powers. See here for more details.
- The special resolution regime also provides for a bank administration procedure for use where there has been a partial transfer of business from a failing bank.
- The best choice of tool(s) will be assessed at the time of use by the authorities and the tools can be used separately or in combination.
6. A firm must meet four Resolution Conditions before stabilisation powers are exercised by the Bank.
Resolution Condition 1 is that the bank is failing or likely to fail. This is determined by the PRA (or, in the case of FCA solo regulated firms, the FCA) in consultation with the Bank of England.
- Resolution Condition 2 is that, having regard to timing and other relevant circumstances, it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of the bank that will result in Condition 1 ceasing to be met. This condition, along with conditions 3 and 4, are determined by the Bank of England, in consultation with HMT, the PRA and the FCA,
- Resolution Condition 3 is that the exercise of the power is necessary having regard to the public interest in the advancement of one or more of the special resolution objectives.
- Resolution Condition 4 is that one or more of the special resolution objectives would not be met to the same extent by the winding up of the bank.
7. Today’s decisions followed consultation between the PRA, the Bank of England, the FCA, and HM Treasury against the special resolution objectives laid down in the Banking Act 2009. The Bank considered that the conditions for exercising stabilisation powers under the Banking Act 2009 were met.
8. See the Silicon Valley Bank UK Limited Mandatory Reduction and Share Transfer Instrument
9. Contact details for media enquiries: