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HSBC has bought the UK unit of Silicon Valley Bank of America. This deal has been done for only 1 pound i.e. around 99 rupees. The acquisition price is only in name as the entire debt of the Silicon Valley Bank is backed by the government. That is, HSBC will not have to repay any loan after this deal.
HSBC said that as of March 10, Silicon Valley Bank UK Ltd had loans of around £5.5 billion and deposits of around £6.7 billion. Silicon Valley Bank has collapsed on March 10. After the bank collapses, billions of dollars of depositors are left stranded.
Understand the collapse of Silicon Valley Bank in a sequential manner
The bank had $ 189 billion in deposits in 2021. Silicon Valley Bank had bought several billion dollars of bonds with the money of its customers in the last 2 years, but it did not get proper return on this investment due to low interest rate. Meanwhile, the Federal Reserve Bank increased interest rates for tech companies.
Most of SVB’s clients were start-ups and tech companies that needed funding for their businesses. In such a situation, she started withdrawing money from the bank. Investors in tech companies reduced due to rising interest rates. Due to non-availability of funding, the companies also started withdrawing their remaining money from the bank. Due to frequent withdrawals, the bank had to sell its assets.
On March 8, SVB reported that it had sold several securities of the bank at a loss. Also, to strengthen its balance sheet, it announced the sale of new shares worth $ 2.25 billion. This created an atmosphere of fear among many big capital firms and the firms advised the companies to withdraw their money from the bank.
After this, the stock of SBV declined on Thursday, due to which the shares of other banks also suffered heavy losses. The shares of SVB were put on hold till Friday morning after investors were not found. In addition, several other bank stocks were also temporarily blocked on Friday, including First Republic, PacWest Bancorp and Signature Bank.
