Published On: 21 March 2023

Silicon Valley Bank (SVB), the 16th largest bank in the US, was shut down by the country’s regulators last week, with HSBC moving to buy the UK arm of the collapsed institution.

Since the bank specialises in lending to technology companies, the rescue by HSBC will be a huge relief to tech firms in the UK, who can continue accessing their deposits and banking services as normal.

It should be pointed out that HSBC paid just £1 for the SVB’s UK arm, and that no taxpayer money has been used to rescue it.

Of course, bank bailouts are, for many of us, a very fresh and visceral memory. That’s why both the Chancellor of the Exchequer and the Bank of England have sought to assuage fears that this may have been a “Lehman Brothers moment” – in reference to one of the catalysts behind the 2008 global financial crisis.

Chancellor Jeremy Hunt insisted there was “never a systemic risk to our financial stability in the UK”, while the Bank of England stressed that “no other UK banks are directly materially affected by these actions”.

“The wider UK banking system remains safe, sound and well capitalised,” the Bank stated.

The speed at which US and UK regulators moved to manage the risk of SVB, reduce contagion and protect depositors should be applauded.  Whilst there will undoubtedly be an impact on financial markets and volatility in banking assets, the threat to the global financial system remains low.

Although the majority of shareholders in SVB were passive investors, at Murdoch, we have some exposure within our portfolios, but the weightings within the funds were small and the impact thus minimal.  We will continue to assess the situation closely, but so far have been comforted by the risk management of regulators and fund managers alike.

If this affects you and you’d like to discuss our opinion, please call us on 01420 83517 or email info@murdochasset.co.uk

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