SVB collapse: As biotechs report exposure to lender, US government moves to guarantee deposits and HSBC buys UK unit

By Jane Byrne

- Last updated on GMT

© GettyImages/Henrik5000
© GettyImages/Henrik5000

Related tags HSBC Silicon Valley Bank Sangamo Therapeutics Eiger BeiGene

Businesses and individuals that have money deposited with failed US bank Silicon Valley Bank (SVB) will be able to access all their cash from today, said the US government.

SVB, which was known as a lender to startups, particularly in the tech and healthcare domain, was shut down by regulators who seized its assets on Friday, after depositors rushed to withdraw funds amid concerns about the bank's balance sheet.

The bank’s collapse had sent shockwaves through global markets, hitting banking stocks and Silicon Valley startups, noted Reuters​.

In a statement​ yesterday, the US Treasury, the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) said depositors would be fully protected. The taxpayer will not bear any losses from the move, it added.

In other developments, SVB UK Ltd, the UK unit of the US bank, was sold to HSBC today. As of March 10, SVB UK had loans of around £5.5bn (US$6.6bn) and deposits of around £6.7bn (US$8.1bn).

The Bank of England facilitated​ the deal, in consultation with the UK government, using powers granted by the Banking Act 2009. “This sale has protected both the customers of SVB UK and taxpayers,” ran a statement from the UK government.

Noel Quinn, HSBC Group CEO, said the acquisition makes “excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.”

Biotech exposure

Several pharma firms reported cash tied up in SVB, according to a Fast Company​ ​story on the shutdown of the bank. Sangamo Therapeutics, a biotech company, said, in a filing, it had approximately $34.4m in deposits with the bank. Repare Therapeutics said it had less than 2% of its marketable securities with SVB. X4 Pharmaceuticals had about 2.5% of its cash deposits there.

Protagonist Therapeutics also reported cash deposits of $13m in SVB, while Eiger Biopharmaceuticals said it had about $8.3m or nearly 7% of its cash and cash equivalents with that lender.

Today, Danish drug developer, Zealand Pharma, said it expects to recover its deposits held at SVB. It said it had cash, cash equivalents and marketable securities totaling 162.6 million Danish crowns ($23.43m) at the bank, around 15% of the group's liquid funds, but it now expects to recover both its insured and uninsured deposits.

In China, many biotech company issued statements saying their exposure to the lender was limited. BeiGene, one of China’s largest cancer-focused drug companies, said Monday​ it had more than $175m uninsured cash deposits at SVB, that is about 3.9% of its cash, cash equivalents and short-term investments.

Commenting on the SVB collapse, Jared Holz, healthcare equity strategist, Mizuho, said that as long as cash balances are secured, the negative ramifications​ should not be so extreme. “It’s clearly unfortunate for the biopharma complex from an optics standpoint; not so sure the ecosystem goes through a major shift beyond the near-term.”

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