London Daily

Focus on the big picture.
Sunday, Jan 25, 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’s Starmer and Trump Agree on Urgent Need to Bolster Arctic Security
Starmer Breaks Diplomatic Restraint With Firm Rebuke of Trump, Seizing Chance to Advocate for Europe
UK Finance Minister Reeves to Join Starmer on China Visit to Bolster Trade and Economic Ties
Prince Harry Says Sacrifices of NATO Forces in Afghanistan Deserve ‘Respect’ After Trump Remarks
Barron Trump Emerges as Key Remote Witness in UK Assault and Rape Trial
Nigel Farage Attended Davos 2026 Using HP Trust Delegate Pass Linked to Sasan Ghandehari
Gold Jumps More Than 8% in a Week as the Dollar Slides Amid Greenland Tariff Dispute
BlackRock Executive Rick Rieder Emerges as Leading Contender to Succeed Jerome Powell as Fed Chair
Boston Dynamics Atlas humanoid robot and LG CLOiD home robot: the platform lock-in fight to control Physical AI
United States under President Donald Trump completes withdrawal from the World Health Organization: health sovereignty versus global outbreak early-warning access
FBI and U.S. prosecutors vs Ryan Wedding’s transnational cocaine-smuggling network: the fight over witness-killing and cross-border enforcement
Trump Administration’s Iran Military Buildup and Sanctions Campaign Puts Deterrence Credibility on the Line
Apple and OpenAI Chase Screenless AI Wearables as the Post-iPhone Interface Battle Heats Up
Tech Brief: AI Compute, Chips, and Platform Power Moves Driving Today’s Market Narrative
NATO’s Stress Test Under Trump: Alliance Credibility, Burden-Sharing, and the Fight Over Strategic Territory
OpenAI’s Money Problem: Explosive Growth, Even Faster Costs, and a Race to Stay Ahead
Trump Reverses Course and Criticises UK-Mauritius Chagos Islands Agreement
Elizabeth Hurley Tells UK Court of ‘Brutal’ Invasion of Privacy in Phone Hacking Case
UK Bond Yields Climb as Report Fuels Speculation Over Andy Burnham’s Return to Parliament
America’s Venezuela Oil Grip Meets China’s Demand: Market Power, Legal Shockwaves, and the New Rules of Energy Leverage
TikTok’s U.S. Escape Plan: National Security Firewall or Political Theater With a Price Tag?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
The Greenland Gambit: Economic Genius or Political Farce?
The Greenland Gambit: Economic Genius or Political Farce?
The Greenland Gambit: Economic Genius or Political Farce?
Will AI Finally Make Blue-Collar Workers Rich—or Is This Just Elite Tech Spin?
Prince William to Make Official Visit to Saudi Arabia in February
Prince Harry Breaks Down in London Court, Says UK Tabloids Have Made Meghan Markle’s Life ‘Absolute Misery’
Malin + Goetz UK Business Enters Administration, All Stores Close
EU and UK Reject Trump’s Greenland-Linked Tariff Threats and Pledge Unified Response
UK Deepfake Crackdown Puts Intense Pressure on Musk’s Grok AI After Surge in Non-Consensual Explicit Images
Prince Harry Becomes Emotional in London Court, Invokes Memory of Princess Diana in Testimony Against UK Tabloids
UK Inflation Rises Unexpectedly but Interest Rate Cuts Still Seen as Likely
AI vs Work: The Battle Over Who Controls the Future of Labor
Buying an Ally’s Territory: Strategic Genius or Geopolitical Breakdown?
AI Everywhere: Power, Money, War, and the Race to Control the Future
Trump vs the World Order: Disruption Genius or Global Arsonist?
Trump vs the World Order: Disruption Genius or Global Arsonist?
Trump vs the World Order: Disruption Genius or Global Arsonist?
Trump vs the World Order: Disruption Genius or Global Arsonist?
Arctic Power Grab: Security Chessboard or Climate Crime Scene?
Starmer Steps Back from Trump’s ‘Board of Peace’ Amid Strained US–UK Relations
Prince Harry’s Lawyer Tells UK Court Daily Mail Was Complicit in Unlawful Privacy Invasions
UK Government Approves China’s ‘Mega Embassy’ in London Amid Debate Over Security and Diplomacy
Trump Cites UK’s Chagos Islands Sovereignty Shift as Justification for Pursuing Greenland Acquisition
UK Government Weighs Australia-Style Social Media Ban for Under-Sixteens Amid Rising Concern Over Online Harm
Trump Aides Say U.S. Has Discussed Offering Asylum to British Jews Amid Growing Antisemitism Concerns
UK Seeks Diplomatic De-escalation with Trump Over Greenland Tariff Threat
Prince Harry Returns to London as High Court Trial Begins Over Alleged Illegal Tabloid Snooping
×