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Silicon Valley Bank UK saved! UK tech and fintech pantomime can finish its spring season!

As previously published on News Uncut, courtesy of Jasmine Birtles of Money Magpie and regular columnist in the Daily Mail.

It must be great to have money, status and power. A few phonecalls and emails and you can get the UK’s Prime Minister,[1] the Chancellor of the Exchequer, the Chief Secretary to the Treasury, the City Minister and the Science and Technology Secretary jumping around on their strings like marionettes.[2]

That’s what the UK tech and fintech sectors did to avoid their pocket bank – Silicon Valley Bank UK –  going into resolution over the weekend of 11th/12th March 2023.[3] Instead, it was sold to HSBC for £1 and now it is business as usual, with tech and fintech companies burning through the cash from their latest funding round,[4] continuing to make losses and not troubling the scorers with any burdensome payments of corporation tax.[5] SVB UK’s staff have had their annual £15-20 million of bonuses paid.[6]

The value of this pocket bank has been market-tested – it was £1.

That is about right. The sector has no revenue streams apart from deductions-from-face-value on card payments, which are gouged out of UK merchants and passed on to UK consumers in the form of higher prices, and from selling on customer data. It has acted as a propagator of Authorized Push Payment Fraud. To clear a nationwide playing field for it, UK consumers and business have had their access to cash and branch services truncated.[7]

Once they have burnt through their current funding round, SVB UK's customers will have nowhere to go for money: their ‘pocket bank’ has disappeared and HSBC UK Bank plc's lending remit is car loans and mortgages, Venture Capital funding has dried up, and an exit via an Initial Public Offering is a distant mirage. They can duly go into the liquidation process, only now in June or July, rather than March or April - a suitable finale to this pantomime.

The Daily Telegraph reported that 'Government officials ruled out a full taxpayer bailout of the bank'. Jeremy Hunt stated that there was ‘no taxpayer support’, whereas HM Treasury said that ‘no taxpayer money is involved’.[8] Weasel words that mask the truth.

The government has relaxed ‘ringfencing rules’ for this deal. Ringfencing protects taxpayers from subsidizing blow-ups in international and investment business – like this one - by ensuring that high-risk business is not booked into the UK domestic arms of the major banks where the current accounts and savings accounts of UK businesses and consumers are held.

SVB’s portfolio of high-risk loans (estimated at £4-5 billion, 15-20% of the equity of HSBC UK Bank plc) should be booked OUTSIDE the ringfence into HSBC Bank plc but it will initially be held INSIDE it, in HSBC UK Bank plc. This allows the SVB UK loan book to be funded with the money of UK businesses and consumer - exactly what ringfencing was designed to prevent. It reduces the creditworthiness of HSBC Bank UK plc, puts the money of UK consumers and businesses at increased risk, and makes a call on the Financial Services Compensation Scheme more likely, to fund which HM Treasury would have to issue more gilts, for which all UK consumers and businesses are responsible: if taxpayers don’t lose first time around as depositors into HSBC UK Bank plc, we can be hammered second time. That qualifies as 'taxpayer support' in my language.

The ministers involved in the rescue discussions have lionized tech and fintech in the past: they are conflicted and should have recused themselves. Instead they worked all over the weekend – with representatives from the ‘industry’, the Bank of England, SVB UK and HSBC - to set aside the UK laws put in place after the last crisis to protect the taxpayer.

Only one stakeholder was not invited to this jolly party, the one who will pick up the tab if things go wrong: the UK general public.

[1] A graduate of Stanford, Silicon Valley’s university

[2] accessed on 13 March 2023

[3] ‘Pocket bank’: a bank working at the behest of an industry grouping or ecosystem, and owned predominantly by market actors within it, who are also its customers, as both borrowers and depositors

[4] A ‘funding round’ is the block of money invested by Venture Capitalists at each stage of a start-up’s progress to a share flotation or Initial Public Offering. There are normally three or four such rounds before the enterprise goes public, and all the investors and the management cash out

[5] Profits, if there are any, conveniently land on the books of an entity incorporated in the Republic of Ireland, another unresolved Brexit issue

[6] accessed on 20 March 2023

[7] A full explanation of these detriments can be found in

[8] accessed on 13 March 2023


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