London Daily

Focus on the big picture.
Sunday, Jul 12, 2026

Why did Silicon Valley Bank collapse? And how did HSBC rescue its UK arm?

Why did Silicon Valley Bank collapse? And how did HSBC rescue its UK arm?

A weekend of high political drama ends in a rescue deal that leaves fast-growing sector safe in the City

Outside tech circles, Silicon Valley Bank was relatively unknown in the UK. Now, its name is on the lips of almost everyone in business after its sudden collapse – and the swift rescue of its depositors – followed a weekend of high drama.

A wave of fear swept global financial institutions on Friday night, moving into a weekend of crisis talks involving chancellor Jeremy Hunt, Prime Minister Rishi Sunak and the governor of the Bank of England, Andrew Bailey.

Here’s how City leaders found a buyer for SVB’s UK arm, handing a lifeline to a series of the UK’s most promising tech start-ups, stopping them from losing their cash and going bust.


Who is Silicon Valley Bank, and when was the alarm raised?


SVB was the lender beloved of fast-growing tech companies, which had a reputation for understanding the sector’s unique blend of risk and reward. Much of its business was in the US, but it was also a key part of London’s ambition to match Silicon Valley as destination for ambitious tech firms, with its profitable UK business based in Finsbury Square.

Fears were first raised over the stability of the wider California-based bank on Thursday after it said it was seeking to raise $2.25 billion to shore up its balance sheet. It had loaded up on government bond holdings – usually safe investments easily sold to meet liabilities – but it did so at the top of the market in sovereign debt. As central banks raised interest rates, government bonds plunged in value.

In a call on Thursday aimed at reassuring shareholders, SVB CEO Greg Becker said just about the worst two words he could have: “Don’t panic.”

Carnage ensued. Shares in the bank tanked 60% by close of play Thursday, and by Friday morning, trading was halted altogether to prevent shares dropping even further. Firms in the US and UK rushed to close their accounts before it was too late. It was a run on the bank on a scale not seen since the 2008 financial crash.

By Friday afternoon, California regulators had closed the US bank altogether.


What took place in London?


SVB’s UK arm scrambled to reassure investors it was a standalone entity that would not suffer contagion effects from the demise of its US parent. It was too little, too late. By midnight on Friday the Bank of England had stepped in to shut it down, offering deposit-holders little more than the promise of getting back the first £85,000 under the statutory financial insurance scheme.

The Bank of England said in a statement late on Friday: “SVB UK has a limited presence in the UK and no critical functions supporting the financial system.”


How were tech businesses impacted?


The Bank’s statement was met with fury by the UK tech sector, as many as 40% of whom had accounts with SVB.

Venture capital firms were horrified to discover that many of the startups they backed banked exclusively with SVB. Unless SVB could be rescued, the fate of much of the British tech industry was at stake.

Matt Clifford, co-founder of venture capital business Entrepreneur First, said: “[The] most common phrase in my inbox right now is ‘we can’t make payroll with the insured amount’.”

He told The Standard: “The core question is just what happens to those who can’t access to money they need.”

"A bunch of them will not make payroll and a bunch of them will go under."


“If depositors can’t access funds, the startup ecosystem is decimated.”

Within hours, hundreds of tech firms had signed a joint letter to Chancellor Jeremy Hunt, urging him to act fast to avert the collapse of huge parts of the industry.

Hunt and the Treasury’s detailed response contrasted with the words from the BoE, acknowledging SVB’s importance and kicking off emergency talks with the Prime Minister, while scouring UK financial markets for a potential buyer.

HSBC emerged as the rescuer, fighting off interest from several rivals to secure the businesses of a raft of potentially highly lucrative, cutting-edge UK companies.


What led to Silicon Valley Bank’s demise, and why did it blindside so many in the market?


The 40-year-old bank, a staple of the global tech scene, had expanded rapidly at the start of the pandemic amid a boom in global tech stocks, with its deposits as much as tripling over three years. Its expansion had been fuelled by a surge in new tech firms and lightning-fast growth of existing ones.

But tech businesses are often loss-making in their early years and burn cash at a much faster rate than in other industries. To keep pace with this, SVB had invested in lots of safe assets like government bonds and mortgage-backed securities.

That policy made perfect sense in a low-interest rate environment. But when interest rates surged, offering investors a return for parking cash with central banks, the value of SBV’s bond holdings plunged. Before long it had a $1.8 billion hole in its balance sheet.

The bank told shareholders it would sell billions in assets at a loss and would seek a $2.2 billion capital raise to keep its balance sheet in check. But rather than reassure the market, the move sparked widespread panic.

Seb Wallace, a venture capital investor at Triple Point, said “It got toward the end of the trading day and SVB realised the market wasn’t taking it well and they release an announcement which was something along the lines of ‘don’t panic.’”

“And then the market closed and everything went into freefall.”


How did SVB respond?


When the markets opened on Friday morning, rather than rushing to offer further reassurances to customers and shareholders, SVB stayed completely quiet, like a deer in headlights.

At the height of the tech boom in 2021, SVB had a market cap of just under $45 billion, with several hundred billion in assets. But when its shares were suspended on Friday, the firm’s value had fallen 86% to just $6.3 billion.

“What was a bad risk management decision combined with poor communications to turn into a bank run which killed the business. It was a comms and PR disaster for something which is still a fundamentally good business,” Wallace said.

"For the tech sector, this could have been our Lehman moment."


How was Silicon Valley Bank rescued?


Chancellor Jeremy Hunt is known among Whitehall circles for his refusal to work at weekends. But he made an exception, working around the clock with Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey to find a buyer for the SVB’s UK operations.

HSBC snapped it up for £1 in a last minute rescue deal announced before the markets opened on Monday, narrowly averting a major disaster in London’s key tech sector, and bringing a host of fast-growing cutting edge UK firms to the country’s biggest bank as customers.


What does the future hold for Silicon Valley Bank?


SVB’s UK businesses has stayed profitable and the bank has a high reputation among the City’s tech community.

A group of several dozen venture capital businesses signed a statement on Saturday which read: “SVB UK is a trusted and valued partner of the entire innovation ecosystem, powering founders and the venture capital industry. It plays a pivotal role in supporting and financing Britain’s startups.

“In the event that SVB UK were to be purchased and appropriately capitalised, we would be strongly supportive and encouraged our portfolio companies to resume their banking relationship with them.”

Fred Destin, founder of Stride VC and one of the signatories, told The Standard: “This brand was built over many years through expertise and customer service.

“In crisis there is always opportunity. It may be that everybody goes ‘we want to work with you’.

“I’m sure there will be questions to answer and some trust to be rebuilt but it’s not the end of the game.”

Newsletter

Related Articles

0:00
0:00
Close
Government Creates Emergency Support Scheme for Financially Struggling Universities
United Kingdom Replaces Traditional Farm Subsidies With Payments Linked to Environmental Performance
National Grid Reports First Week of Electricity Generation Without Fossil Fuels
United Kingdom Financial Regulator Introduces Tougher Capital Rules for Cryptocurrency Exchanges
Belfast Harbour Expands Operations to Attract Investment Through United Kingdom and European Union Market Access
Scottish Government Threatens Legal Challenge Over Westminster Cuts to North Sea Transition Funding
United Kingdom Accelerates Trans-Pennine High-Speed Rail Project Linking Northern Cities
United Kingdom Secures Ten Billion Pound Investment for Cambridge Quantum Computing Campus
Port Talbot Steelworks Wins Support for Green Hydrogen Transition and Protection of Industrial Jobs
United Kingdom Sends Royal Navy Carrier Strike Group to Indo-Pacific as Regional Security Focus Expands
National Health Service Expands Artificial Intelligence Diagnostics Across England to Reduce Screening Backlogs
United Kingdom Launches Fifty Billion Pound Infrastructure Fund to Accelerate Housing and Construction
UK Medical Chiefs Update Health Guidance to Promote Everyday Physical Activity
Office of Communications Keeps Wikipedia Under Review Under UK Online Safety Rules
UK Defence Ministry Expands Deep-Strike Capability Through Precision Missile Programme
Russell Group Universities Warn Funding Cuts Could Damage NHS Workforce Training
UK Parliament Calls for National Emergency Broadcast as Heatwave Conditions Intensify
UK and Netherlands Strengthen Naval Cooperation With New Amphibious Defence Partnership
UK Defence Ministry Joins International Missile Programme With One Hundred and Ninety Million Pound Investment
Bank of England Warns Middle East Conflict and AI Risks Could Pressure UK Economy
UK Government Introduces New Rules to Limit Foreign Influence in Political Donations
UK and France Prepare Naval Mission to Protect Shipping Through Strait of Hormuz
United States Pressures UK to Increase Defence Spending at NATO Summit
Bank of England Warns Artificial Intelligence Investment Boom Could Create Financial Stability Risks
Bank of England Begins Direct Oversight of Critical Technology Providers Supporting UK Finance
Andy Burnham Set to Become UK Prime Minister After Labour Leadership Race Clears Path to Downing Street
Scottish Fishing Industry Calls for Emergency Support Amid Rising Costs
UK Supports Stronger European Response to Russian Actions in Ukraine
Devon and Cornwall Police Release Suspect in Ann Widdecombe Murder Investigation
Scottish MPs Demand More Government Support for Fishing Industry
UK Aviation Sector Faces New Rules as Parliament Reviews Passenger Protection Reforms
King’s College London Disciplines Students Over Pro-Palestine Campus Protests
Ministry of Defence Expands Military Capabilities Through New Precision Strike Investment
United Kingdom Condemns Russian Treatment of Ukrainian Children at International Security Forum
House of Lords Reviews Civil Aviation Bill to Strengthen Passenger Rights and UK Aviation Competitiveness
UK Aerospace and Defence Industries Contribute Nearly Forty-Seven Billion Pounds to Economy
UK Government Advances Consultation on Possible Social Media Ban for Children Under Sixteen
United Kingdom Ratifies Global High Seas Treaty to Protect Marine Biodiversity
United Kingdom Joins United States Precision Strike Missile Programme With One Hundred Ninety Million Pound Investment
UK Senior NHS Doctors Vote for Further Strike Action Over Pay and Contract Disputes
BBC Leadership Resigns After Donald Trump Launches Ten Billion Dollar Defamation Lawsuit
UK Fiscal Watchdog Warns Andy Burnham Government Faces One Hundred Billion Pound Budget Challenge
The AI Invoice Shock: Layoffs Didn't Save Managers Money — They Cost Them More
Concern: Sexually Transmitted Bacterium Among Men Develops Antibiotic Resistance
Following Massive Investor Demand: SK Hynix Raises 26.5 Billion Dollars on Nasdaq
Passenger Partially Pulled Out of Ryanair Jet After Cabin Window Fails Mid-Flight
After Four Years, and Under a Heavy Veil of Secrecy: King Charles Meets His Grandchildren, Harry and Meghan's Children
Cross-Party MPs Call for National Climate Emergency Broadcast
Bayeux Tapestry Arrives in the United Kingdom for Landmark Exhibition
United Kingdom Launches Modern Slavery Prevention Programme in Vietnam
×