Silicon Valley Bank UK (SVB UK) has reportedly granted millions of pounds in employee bonuses just days after being acquired for a single British pound by global banking giant HSBC. According to unnamed sources cited in a Sky News report, payouts to SVB UK staff and senior executives were approved by HSBC UK Bank earlier this week. While the exact amount distributed is unclear, sources claimed that the bonus pool was between £15m and £20m ($18.26m and $24.35m). The insiders added that if SVB UK had not been acquired solvently, the bonuses would not have been paid.
In response to the news of the bonuses, an insider reportedly said that they were “a signal of HSBC’s confidence in the talent base” at SVB UK and were intended to honour “previous agreed payments” as part of efforts to retain key staff. Meanwhile, SVB UK welcomed the acquisition by tweeting that it was “delighted” to join HSBC after 14 years of supporting and growing the UK’s innovative economy.
The news of the bonuses comes just over a week after the Bank of England (BoE) shut down the operations of SVB UK, stating that it had a “limited presence” and no “critical functions” supporting the financial system. SVB UK was ordered to stop making payments or accepting deposits and the BoE intended to apply to the court to place SVB into a “bank insolvency procedure”. Meanwhile, SVB’s US banking arm has been taken into government ownership and SVB Financial Group, the group’s holding company, filed for Chapter 11 bankruptcy protection as it seeks buyers for its other assets.
SVB Group’s chief restructuring officer, William Kosturos, stated that the Chapter 11 process would allow the company to “preserve value as it evaluates strategic alternatives for its prized businesses and assets”. He emphasised that SVB Capital and SVB Securities would continue to operate, led by their respective independent teams despite the bankruptcy filing.
The bonuses paid out to SVB UK employees have raised eyebrows, especially given the company’s recent financial difficulties. Critics have argued that the payments are inappropriate given that the bank was recently sold for just £1 and had been disallowed from making payments or accepting deposits by the BoE. Some have even alleged that the payments were intended to help key SVB UK staff members move to HSBC and distract other employees from the company’s current financial and operational issues.
It is unclear whether HSBC was aware of the bonus payments before closing the acquisition of SVB UK. However, some industry insiders have suggested that they could pose a reputational risk to both companies. HSBC has already faced questions about its commitment to environmental, social, and governance (ESG) issues, and the bonus payments made to SVB UK employees could further harm the UK bank’s reputation in this area. SVB UK’s handling of the situation may also damage its standing in the technology and innovation sectors, which have been hit hard by the pandemic.
One possible outcome of the situation could involve HSBC implementing tougher controls over SVB UK’s hiring and compensation processes to avoid any similar incidents in the future. The company may also need to take steps to restore confidence among customers and other stakeholders, especially those in the technology and innovation sectors. Other global banks have faced reputational damage in recent years due to scandals involving inappropriate bonuses and compensation practices. As a result, industry experts have called on HSBC to take swift and decisive action to restore confidence in the company’s ESG and compensation practices.
