The UK government cleared the way for HSBC Holdings Plc to buy the British arm of Silicon Valley Bank by waiving certain restrictions on what types of customers could be taken on by its UK retail bank.
(Bloomberg) — The UK government cleared the way for HSBC Holdings Plc to buy the British arm of Silicon Valley Bank by waiving certain restrictions on what types of customers could be taken on by its UK retail bank.
HSBC was given an exemption over rules that do not allow complicated corporate customers to be housed within ring-fenced banks, Andrew Griffith, the City Minister, said in a letter Monday to the Treasury Select Committee. He later told Bloomberg TV that neither the government nor the Bank of England gave HSBC any guarantees.
“The Government is using its powers under the Banking Act to provide HSBC with an exemption to certain ring-fencing requirements,” Griffith said in the letter to the committee’s chair, Harriet Baldwin. He later told the House of Commons that the ring-fence waiver would be permanent.
Ring-fencing requires banking groups to separate their retail banking services from their investment and international banking activities. It was part of the government’s response to the global financial crisis in 2008 and was aimed at protecting UK retail banking from shocks emanating from elsewhere.
The concession was one of the terms of the deal thrashed out between the Treasury and HSBC overnight and announced just before markets opened. Its UK-based ring-fenced subsidiary is paying £1 to take on SVB’s business, the bank said.
“The government’s interests were to get a quick conclusion to this to protect depositors,” Griffith said on Bloomberg TV. “There was competitive interest. I’m pleased above all else we’ve been able to deliver for the customers of the bank.” When asked whether the government or the BOE had given guarantees to HSBC, he replied “no.”
HSBC emerged as a late contender to buy the tech-focused lender over the weekend. Other big banks which considered a deal would also have been likely to receive the ring-fencing waiver.
In a major win for the government, HSBC is buying the business without taxpayer support. The sale to HSBC was agreed “without the use of any public funds,” Griffith wrote.
Read More: SVB Crisis Exposes Lurking Systemic Risk of Tech Money Machine
–With assistance from Joe Mayes.
(Adds detail on ring-fencing exemption being permanent in third paragraph.)
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