UNITED KINGDOM: According to reports, the UK division of the defunct Silicon Valley Bank (SVB) gave out millions of pounds in bonuses just days after being bought out in a rescue arrangement for one pound.
A “modest” incentive pool of between £15 million and £20 million is said to have been used to pay out bonuses to Silicon Valley Bank UK (SVB UK) employees. Eight days ago, the bank with headquarters in California collapsed, raising fears of a fresh global banking catastrophe.
In a tweet, SVB UK said that HSBC UK had acquired the company and they were resuming normal operations from today.
Details about the payments became public this weekend while Credit Suisse and UBS were talking about a possible takeover. Credit Suisse has been in a lot of trouble lately, and UBS is trying to buy it. To keep the public’s trust in the global financial system, regulators are currently fighting on a global scale.
According to Sky News, which broke the news of the bonuses, HSBC, the company’s new owner, authorized the payments to SVB UK employees. The bonuses, according to the bank, were decided upon before the bank’s collapse.
“We wanted this business, and we wanted to retain the people who, in turn, support its customers,” HSBC UK CEO Ian Stuart said.
“We have honoured these previously agreed payments to recognise their expertise and demonstrate our confidence in SVB UK,” he added.
The Bank of England and HM Treasury worked together to help sell SVB UK. The sale was not paid for by the government or taxpayers, says the bank. More than 600 people work for the company.
Even though Credit Suisse got a £45 billion emergency loan from the Swiss National Bank on Friday, its shares went down by 8%. Morningstar Direct says that between March 13 and 15, more than $450 million (£369 million) was taken out of Credit Suisse’s US and European-managed funds.
This past weekend, Credit Suisse and regulators talked a lot about a possible merger with Swiss banking giant UBS. Credit Suisse is said to employ more than 5,000 people in London.
A source quoted by the Financial Times said that UBS is trying to get concessions from any possible merger, such as an indemnity or an agreement from the government to pay for future legal costs. According to reports, regulators believe that a merger may be the only way to stop the loss of trust in Credit Suisse.
Also Read: SVB’s Collapse Could Force Central Banks to Stop Interest Rate Hikes