What about SVB UK’s CBILS borrowers?
The high-profile collapse of US tech start-up lender Silicon Valley Bank this month sent shockwaves around the world, highlighting the impact of rising interest rates on the global banking system.
Its UK division, Silicon Valley Bank UK (SVB UK), was bought by HSBC earlier this month. The acquisition means that all depositors’ money with SVB UK is safe and the business will continue to be operated normally.
However, no mention was made regarding SVB UK’s government-backed loans to struggling businesses during the pandemic.
The coronavirus business interruption loan scheme (CBILS) was administered by the British Business Bank during the public health crisis, facilitating much-needed funds to businesses via accredited lenders. Loans ranged between £50,000 and £5m, with 80 per cent of the loan’s value underwritten by the government.
SVB UK was accredited as a lender under CBILS and originated 10 loans worth a total of £21.2m, according to British Business Bank data. It was also accredited to CBILS’ larger counterpart, although it did no lending under this scheme.
While it is clear that SVB UK facilitated a small proportion of CBILS loans overall, it still raises questions over what happens when an accredited lender changes ownership.
A spokesperson for the state development bank said that it takes insolvency risk into account during the accreditation process.
“The Bank considers these issues carefully for each accreditation in order to protect taxpayer’s money,” the spokesperson said. “Each lender is party to contractual arrangements to cater for various circumstances that could arise, including a lender’s insolvency.”
The British Business Bank would not comment specifically on the HSBC acquisition and whether this would impact the borrowers’ loan agreements.
All lenders will tend to have different terms, collections and recoveries processes, meaning that borrowers could face a different agreement to the one they initially signed up to, depending on the conditions of the acquisition.
The issue of debt ownership came to the fore last year, when Funding Circle sold a book of loans to specialist debt purchaser Azzurro Associates, provoking ire from analysts and politicians over the potential impact on those borrowers. It should be noted however that this was a sale of a bundle of loans, rather than an entire lender.
Luckily for SVB UK’s CBILS borrowers, Peer2Peer Finance News understands that they are not expected to face any such changes. As SVB UK is still a subsidiary and a ringfenced bank, the loan book should remain separate.
Even if HSBC were to take over the book, a debt collections expert told Peer2Peer Finance News that HSBC is well regarded in respect of its customer journey, including collections and recoveries.
In the event that customers did not engage with the bank, it’s unlikely the bank would sell these debts as they are government-backed, the expert said. However, they could outsource them to an agency to recover, to show efforts have been made both internally and externally before making a claim back from government.
HSBC was contacted for comment.