HSBC acquired the U.K. branch of the failing Silicon Valley Bank for just 1 pound, or $1.21.
The two entities came to the agreement after a full night of negotiations between HSBC and the U.K. Treasury. The government had to issue a special waiver in order to allow the acquisition, specifically regarding ringed fence laws, regulations that were put in place after the 2008 financial crisis that requires banks to separate their retail banking services from their investment and international banking activities, Bloomberg reported.
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The U.K. government played a central role in the acquisition.
"Early this morning, the Bank of England used its stabilisation powers under the Banking Act 2009 to resolve Silicon Valley Bank UK Ltd (SVB UK). SVB UK is a subsidiary of a US firm that was put into US authority receivership on Friday, following significant outflows," Economic Secretary to the Treasury Andrew Griffith wrote in a letter to the head of the Treasury Select Committee.
He added that the action had only been taken following consultation with several government ministries.
"The resolution action has been achieved through the Bank of England, in consultation with HM Treasury, facilitating the sale of SVB UK to HSBC. This involves using the Private Sector Purchaser power under the Special Resolution Regime as set out in the Banking Act 2009. As required by the Act, the Bank of England consulted the Treasury, Prudential Regulation Authority, and the Financial Conduct Authority on its assessment of resolution conditions 2-4 before concluding that all four resolution conditions had been met," he continued.
"Today's actions will protect SVB UK's customers and depositors who will be able to access banking services as normal. This will provide comfort to the UK's innovation sector, given the reliance of many of these firms on SVB UK," he explained.
Griffith assured in the letter that the sale does not use public funds or government guarantees. Instead, the government will use powers granted to it under the Banking Act to "provide HSBC with an exemption to certain ring fencing requirements."
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“This acquisition makes excellent strategic sense for our business in the UK,” Noel Quinn, the chief executive of HSBC, said in a statement.
The Biden administration also took measures to protect investors at the collapsing bank, ensuring that depositors would have access to their money on Monday.