London Daily

Focus on the big picture.
Thursday, Sep 17, 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
UK Competition Regulator Deepens Scrutiny of Microsoft’s Business Software and AI Market Position
NHS England Reforms Focus on Cutting Waiting Lists and Improving Digital Care
England Maintains Mandatory Housing Targets in Push for 1.5 Million New Homes
UK Government Plans Statutory Industrial Strategy Council to Strengthen Long-Term Economic Policy
Asthma Charity Warns of Major Gaps in Childhood Diagnostic Testing Across England
TUC Chief Paul Nowak Appointed to Bank of England Court
Bristol Opens £35 Million Deep-Tech Innovation Hub at Temple Quarter
Oxfordshire Village Votes Symbolically to Leave UK Over Asylum Housing Plan
Andy Burnham Deepens UK Defense and AI Cooperation With NATO and Canada
UK Government Announces Neonatal Safety Reforms After Thirlwall Inquiry
Bank of England Weighs Rate Decision as UK Inflation Rises to 3.1%
UK Health Unions Warn of Staffing Pressures as Public and Private Pay Growth Diverges
Rockstar Games Faces Tribunal Claims From 23 Former Grand Theft Auto VI Developers
UK Treasury Faces Tighter Budget Constraints as Borrowing Costs and Pension Spending Rise
Prime Minister Andy Burnham Sets Out Ten-Year Plan for Greater Public Oversight of Utilities
UK Economy Grows 0.4% in July as Services and Technology Activity Strengthen
Scotland, Wales and Northern Ireland Leaders Coordinate Push for UK Constitutional Change
Police Tighten Public-Order Measures After Anti-Immigration Protests in Dover and Portsmouth
UK Ministers Pressed for Answers After US Diplomat Accused of Child Abuse Images Leaves Britain
Jaguar Land Rover Pursues NATO Defense Contracts for Defender Vehicles
British Service Member Dies in Road Accident While Deployed in Ukraine
George Osborne Calls for Britain to Rejoin EU Customs Union
Anthropic Chief Dario Amodei Urges Faster UK Action on Advanced AI Risks
UK State Pension Set for 3.9% Rise Under Triple Lock
UK Labour Market Cools as Payrolled Employment Continues to Decline
Reform UK’s £72 Million in Donations Faces Scrutiny Under Proposed Retrospective Funding Rules
UK Doctors Warn Expanded Pharmacy First Scheme Could Put Patients at Risk
British Airlines Cut Short-Haul Capacity as Jet Fuel Costs Rise
UK News Publishers Forecast 40% Search Traffic Drop as AI Overviews Expand
Axel Springer Wins Approval for £575 Million Daily Telegraph Acquisition
London Mayor Sadiq Khan Opposes Heathrow Third Runway Over Climate Targets
Scotland, Wales and Northern Ireland Leaders Hold Summit Seeking Greater Autonomy
UK Energy Price Cap Set to Rise to £1,723 in October
UK Treasury Warns Middle East Conflict Is Threatening Economic Growth
Labour Moves to Retrospectively Cap Overseas Political Donations After Reform UK Funding Surge
HMRC Warns Nearly Seven Million Adults Are Unclear About State Pension Entitlements
UK Parliament Passes Sovereign Grant Reform Before Conference Recess
British Rail Passengers Gain Automatic Right to Switch Operators During Disruptions
Burnham Hosts Downing Street Business Summit as UK Fiscal Pressure Builds
Labour Government Moves to Challenge £72 Million in Reform UK Crypto Donations
UK Advertising Industry Warns Wider Junk Food Rules Could Put £1 Billion in Media Spending at Risk
Cornwall Opens Devolution Talks With UK Government Over Transport and Local Services
UK Parliament Considers Sovereign Grant Reform Setting Royal Funding at £99.9 Million
Trades Union Congress Calls for Income-Based Energy Tariff Funded by Higher Bank Levy
UK Prime Minister Rejects Second Scottish Independence Referendum
House of Lords Begins Scrutiny of Bill to Lower UK Voting Age to 16
Anthropic Says Claude Was Exploited in Weapons-Related and State-Linked Cyber Activity
Institute of Directors Urges UK Government to Avoid Business Tax Increases in Autumn Budget
Rising Gilt Yields Cut UK Fiscal Headroom to About £13 Billion Ahead of Budget
UK Economy Grows 0.4% in July as Services and Technology Activity Strengthen
×