UK arm of Silicon Valley Bank hands out £15m in bonuses days after £1 bailout | Economic news
The UK branch of Silicon Valley Bank (SVB UK) has handed out millions of pounds in bonuses to employees just days after its insolvency was averted thanks to a bailout deal orchestrated by the Bank of England.
Sky News has learned that payments to staff, including its senior executives, have been approved by HSBC, The new owner of SVB UKearlier this week.
Sources described the bonus pool as “modest” and said it totaled between £15m and £20m.
It was unclear on Saturday how much had been awarded to Erin Platts, the British bank’s chief executive, or her senior colleagues.
An insider said the bonus payments were a sign of HSBC’s confidence in its new subsidiary’s talent base and that the buyer was keen to honor previously agreed payments to help retain key staff.
Employing around 700 people in Great Britain, SVB United Kingdom is a profitable business but was brought to the brink of collapse last weekend by the misfortunes of its US parent company.
Had it not been solvently acquired, the bonuses would not have been paid out this week, according to insiders.
One pointed out that shares held by senior executives and other employees had been rendered worthless by the near collapse of SVB UK.
In the United States, its banking arm has been taken over by the government and its holding company, SVB Financial Group, has now filed for Chapter 11 bankruptcy as it seeks buyers for its other assets. .
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Bonuses were also paid to its US staff just hours before the Santa Clara-based bank collapsed, according to reports last week.
An emergency auction in which Rishi Sunakthe Prime Minister, played a pivotal role and attracted interest from challenger banks including Oaknorth and The Bank of London.
HSBC, Europe’s biggest lender, reached a deal before markets opened in London on Monday to buy SVB UK for £1.
He obtained a waiver from the banking ring-fencing rules introduced after the 2008 financial crisis.
Jeremy Huntthe chancellor, said the bailout had been key to preserving funding for some of the UK’s most promising start-ups.
“The UK’s tech sector is truly world-leading and critically important to the UK economy, supporting hundreds of thousands of jobs,” he said.
“We have worked urgently to deliver on this promise and find a solution that will give confidence to SVB UK customers.
“(This) ensures that customer deposits are protected and can bank as normal, without taxpayer support.”
The government had been under intensive pressure last weekend by hundreds of tech entrepreneurs over the alarming state of SVB UK.
They warned of “an existential threat to Britain’s tech sector”, adding: “The Bank of England’s assessment that SVB taking office would have a limited impact on the UK economy shows a dangerous lack of understanding of the sector and the role it plays in the wider economy, now and in the future.”
The founders warned Mr Hunt that the collapse of SVB UK would ‘cripple the industry and set the ecosystem back 20 years’.
“Many companies will be put into involuntary liquidation overnight,” they wrote.
Sky News revealed this week that Ms Platts, who has worked in the lender’s UK operations since 2007, would stay on after talks with Ian Stuart, the chief executive of HSBC UK.
SVB UK’s independent directors, including chairman Darren Pope, are also expected to remain under HSBC ownership.
This indicates HSBC’s intention to allow the technology-driven lender to operate with a degree of autonomy on an ongoing basis.
However, the Silicon Valley Bank brand could disappear in the UK, depending on its fate in the US, an insider said.
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The unrest at the SVB threatened to escalate into a much wider banking crisis, with the Financial Times reporting on Friday evening that UBS is in talks to take over all or part of its Zurich counterpart, Credit Suisse.
In the United States, a group of major lenders, including Bank of American and JP Morgan, provided a $30 billion lifeline to First Republic on Thursday.
However, his shares continued to tumble on Friday, sparking fresh fears for his health.
A spokesperson for SVB UK declined to comment on the bonuses paid out this week.