Silicon Valley Bank’s collapse & acquisition by HSBC: Business community reacts

Today (Monday March 13) saw California based Silicon Valley Bank collapse, only for HSBC to swoop in and rescue the bank’s UK arm for £1. This development has inevitably caused a ripple effect across a number of sectors. Today we hear from industry insiders regarding this unprecedented series of events. Read on to find out more…

AJ Bell investment director Russ Mould:

“Despite the best efforts of governments and regulators, the market was still very edgy on Monday as investors considered the fallout from SVB’s collapse. There’s plenty to worry about whether it be the conflict in Ukraine, inflation, rising interest rates and now a potential banking crisis has been added to the mix. Little surprise people are feeling a bit spooked.

“For now, the panic which set in late last week appears to have been contained but whether the market can regain the confidence which saw the FTSE 100 hit a record high earlier this year remains to be seen.

“The funding environment for technology and start-up companies is certainly looking a lot less healthy and focus may start to turn to the asset managers and private equity funds which are invested in these firms.

“The frenzied announcements from UK small caps which emerged first thing this morning look like they can be put on hold for now as HSBC emerges as a white knight to buy up the UK arm of tech and startup lender SVB for £1 and take on all its deposits and liabilities.

“Hopefully the swift action and HSBC’s ample liquidity means companies will be able to get the cash they need to meet payroll requirements.

“Failures in the financial sector are often revealing of sensitivities to which investors had previously not given a huge amount of thought. SVB’s sudden collapse was a reminder that many banks are sitting on large unrealised losses in their bond portfolios.”

Charles Fletcher, partner at Mishcon de Reya:

“The collapse of Silicon Valley Bank, and subsequent rescue of the UK arm by HSBC, has important lessons for any start-up. Emerging tech companies are vital for the nation’s continued economic prosperity. We work with businesses from across the emerging company and venture capital community.

“In our experience, there are simple, practical steps to financial management that businesses can take to minimise the uncertainty and stress many have experienced over the weekend.

“Key actions include keeping corporate accounts with more than one bank, having an emergency funding plan to avoid cashflow squeezes, separating funds from different sources and taking a strategic approach to managing currencies.

“These should accompany fundamental business planning and management steps, such as a detailed risk register and crisis management protocols.”

Aman Behzad, founder and managing partner of fintech advisory Royal Park Partners:

“A great outcome today with HSBC stepping in to buy SVB UK. With 100 per cent of deposits guaranteed, all founders with money at SVB can now go and get some rest after having their hearts in their mouths this weekend.

“Tech underpins the UK, and indeed global, economic ecosystem and it is a relief that an existential crisis has been averted. It’s inspiring to see the government working closely with the industry to find a timely solution, and safeguard the innovative businesses that are vital to our economy’s growth.

“No doubt an important test, this signals a commitment to safeguarding those building our future, and I hope to see greater support for innovators going forward.”

Walid Koudmani, chief market analyst at online investment platform XTB.com:

“A combination of ‘risk appetite’ sentiments fueled by hope around a ‘helpful Fed’ and banking sector problems put downward pressure on the US dollar over the weekend.

“Following the bankruptcy of three US banks Silvergate, Signature, Silicon Valley Bank (now we know that,First Republic Bank also joined) the Federal Reserve, the Treasury Secretary and the National Economic Council reached an agreement with banking regulators to ensure that clients would be able to withdraw their funds.

“As mentioned, another US bank may be facing collapse - First Republic Bank. This bank is trading 60 per cent lower in the US premarket session and has significantly impacted moods on the markets following the European cash session open with the German Dax down over 3,25 per cent from daily highs.

“Furthermore, this situation has also significantly impacted expectations for the upcoming Fed decision with many now expecting a 25bp hike when it seemed almost certain for some that the US central bank would raise rates by 50 bp previously.

“In any case, markets remain very reactive and susceptible to further developments and could continue to be volatile throughout the week as a major domino effect could cause widespread risk-off moods leading to further losses for stocks and riskier assets.”

John Glencross, CEO and co-founder of Calculus:

“The speed of the response by the Treasury shows the importance it places on the UK technology and healthcare sectors and their contribution to the economy.

“The Prime Minister, Rishi Sunak reinforced this, stating he will always be on the side of entrepreneurs and innovators. The UK venture capital, start up and scaleup community should feel reassured by the outcome.”

By Matthew Neville – Senior Correspondent, Bdaily

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