How SVB Bank Run Impacts Hong Kong

Following the second largest bank failure in the United States, more than 12 Hong Kong-listed companies have issued statements on their exposure in the incident. While at least eight Hong Kong-listed companies confirmed cash deposits in the troubled Silicon Valley Bank (SVB), some others issued statements to reassure investors that they do not have ties with SVB.

Headquartered in Santa Clara, California, Silicon Valley Bank is a mid-sized US bank that mainly serves tech companies and start-ups in the region. However, the bank also has its footprints in Hong Kong, Beijing, Shanghai, and Shenzhen. SVB’s Hong Kong Representative Office is located in Jardine House, one of the most iconic commercial buildings in the city.

Front Entrance of the Hong Kong Monetary Authority. (Photo Credit: Matthew Cheng)
Front Entrance of the Hong Kong Monetary Authority. (Photo Credit: Matthew Cheng)

According to the Hong Kong Monetary Authority, the representative office of SVB in Central is not a recognized banking institution and SVB is not allowed to provide any banking service in the city. The Hong Kong Monetary Authority spokesperson added that SVB’s risk exposure in Hong Kong is very small and does not constitute any risk to the stability of Hong Kong’s banking system.

On March 10, 2023, SVB was resolved and taken over by the Federal Deposit Insurance Corporation, after the stock price of SVB Financial Group, SVB’s parent company, tumbled, following SVB’s announcement on its decision to book a USD1.8 billion loss and raise an additional USD2.25 billion that triggered a bank-run shortly after.

Matching its domestic customer base, most of the companies that filed voluntary statements to the Hong Kong Stock Exchange are technology and biotech companies listed in Hong Kong. According to their separate statements, most companies claimed that their cash deposits in SVB are minimal and immaterial compared to their overall cash position. None of the companies has more than 10% of their total cash or cash-equivalent assets deposited in SVB.

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The Silicon Valley Bank (SVB) logo in front of the SVB headquarters on March 10, 2023 in California. (Photo Credit: Getty Image)

Hong Kong-listed companies BeiGene Ltd., Brii Biosciences Ltd., Broncus Holding Corp, Mobvista Inc., CStone Pharmaceuticals Ltd., and Noah Holdings Private Wealth and Asset Management Ltd. have all disclosed approximate numbers of their cash position in the collapsed Silicon Valley Bank.

“The Company has uninsured cash deposits held at SVB representing approximately 3.9% of its last reported total cash, cash equivalents, restricted cash, and short-term investments of US$4.5 billion as of December 31, 2022,” said BeiGene Ltd. in a voluntary statement filed to the Hong Kong Exchange.

CANbridge Pharmaceuticals Inc. and Zai Lab confirmed that they hold cash in SVB but did not disclose the exact amount of their cash holdings.

Both Jacobio Pharmaceuticals Group Co and Vobile Group transferred their cash deposits in SVB on March 9, 2023, one day before the federal take-over of the Bank.

In an act to ensure investor confidence, other Hong Kong-listed companies such as Meitu and MicroPort Scientific also issued statements to clarify they do not have any financial assets deposited in SVB, and do not hold any commercial relationships with the bank.

“To avoid any potential public misunderstanding, the Company wishes to clarify that the Group has not held any bank account(s) or money at Silicon Valley Bank since 2020, nor does the Group have any current or ongoing banking relationship with SVB,” said Meitu in a voluntary statement filed to the Hong Kong Exchange.

A Branch of HSBC in Central Hong Kong. (Photo Credit: Matthew Cheng)
A Branch of HSBC in Central Hong Kong. (Photo Credit: Matthew Cheng)

While SVB’s US operation was taken over by the Federal Deposit Insurance Corporation, it also needs to look for buyers to take over its overseas operation. In the UK, SVB’s operation was taken over by HSBC with a nominal GBP1. It is yet to be confirmed whether HSBC’s Hong Kong entities will take part in the acquisition process.

“SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety, and security of HSBC,” said Noel Quinn, HSBC Group Chief Executive.

SVB also has a big presence in China with its subsidiaries in Beijing, and Shanghai, and its joint venture bank with Shanghai Pudong Development Bank – SPD Silicon Valley Bank. No news on any sort of takeover of SVB’s operation in China has been announced.

(Feature Image: Matthew Cheng)

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