London Daily

Focus on the big picture.
Thursday, Jun 18, 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
Health Authorities Warn of Rising Cases of Seasonal Respiratory Illnesses
BAE Systems and Rolls-Royce Advance Multi-Nation Fighter Aircraft Programme
National Archives Publish Declassified Documents on Cold War Energy Security Planning
British Retail Spending Rises Despite Continuing Cost-of-Living Pressures
Wales Launches Social Housing Pilot to Address Affordability Pressures
British Energy Companies Commit £5 Billion to Geothermal and Hydrogen Projects
Northern Ireland Debates Cross-Border Healthcare Partnership With the Republic of Ireland
UK Establishes National Artificial Intelligence Safety Centre With Leading Universities
UK Reports Decline in Small Boat Crossings After Expanding Intelligence Cooperation With France
Scottish Parliament Launches Inquiry Into Delays to Renewable Energy Projects
National Crime Agency Dismantles Alleged Multi-Million-Pound Money Laundering Network in London
Transport Strikes Disrupt Rail and Bus Services Across Northern England
United Kingdom and European Union Open New Security Dialogue on Defense and Border Cooperation
Bank of England Holds Interest Rates at 5% as Services Inflation Remains Elevated
UK Government Unveils Major National Health Service Reform Focused on Decentralization and Performance Funding
Government Advances New Airport Slot Rules to Ease Airline Operating Constraints
BBC Opens Flagship Science-Fiction Franchise to Competitive Production Bids
Chancellor Meets City Leaders Amid Concerns Over Gilt Market Liquidity
Rathbones Shares Fall Seventeen Percent After Regulatory Review Reveals Compliance Failings
United Kingdom Joins Group of Seven Initiative Using Artificial Intelligence and Quantum Computing for Cancer Research
Parliament Debates Doubling Tax Allowance for Pensioners After Major Public Petition
Measles Cases Exceed Seven Hundred in London and the West Midlands
British Military Leadership Faces Parliamentary Scrutiny After Defence Secretary's Sudden Resignation
House of Lords Begins Debate on Steel Industry Nationalisation Legislation
Parliament Advances Bill to Abolish NHS England and Create Single Patient Records
Parliament Fast-Tracks National Security Bill to Expand Powers Against Foreign Threats
United Kingdom and European Union Set July Summit to Deepen Post-Brexit Cooperation
United Kingdom Imposes Seventy New Sanctions on Russia and Expands Support for Ukraine's Nuclear Sector
United Kingdom Announces Social Media Ban for Children Under Sixteen
0British Government Investigates Reports of Russian Warship Firing Warning Shots Near Isle of Wight
UK Supreme Court Revises Legal Definition of Deprivation of Liberty
King’s Birthday Honours Recognise Contributions Across Science, Culture and Public Service
UK Ministry of Defence Reports Interdiction of Russian Shadow Fleet Vessel
UK and US Launch Joint Regulatory Programme for Medicines and Healthcare Products
Solicitor General Refers Murder Sentence to Court of Appeal Under Unduly Lenient Scheme
UK Launches £1.6 Million Mobile Museum Initiative to Expand Cultural Access
Judicial Pay Structure Undergoes Government Review Following Senior Recommendations
Government Confirms Nearly 180 New Youth Hubs Across the United Kingdom
UK Government Expands Careers Support Through Partnership with LinkedIn
Digital News Report Highlights Growing Global Concern Over AI and Information Overload
UK Chancellor Reaffirms Fiscal Discipline and Borrowing Reduction Strategy
UK Government Invests £219 Million in Sustainable Aviation Fuel Development
Rolls-Royce Small Modular Reactors Secures Major Swedish Export Contract
Government Confirms Locations for Nearly 180 Youth Hubs Across Great Britain
UK Government Partners with LinkedIn to Expand Employment Support Services
Reuters Institute Report Flags Rising Public Anxiety Over News and Information Overload
UK Government Commits £219 Million to Expand Sustainable Aviation Fuel Industry
Chancellor Convenes Market Engagement Group to Assess UK Economic Outlook and Productivity Risks
Rolls-Royce Wins Multibillion-Pound Swedish Contract for Small Modular Nuclear Reactors
Government to Ban Social Media Access for Under-Sixteens Across the United Kingdom
×