Silicon Valley Bank

Andrea Leadsom Excerpts

Monday 13th March 2023 Commons Chamber

[Andrew Griffith]

I must be very careful not to comment on matters as they relate to the United States. SVB UK was a separate bank. It was regulated here, and it was as a result of that regulation, and the fact that we have taken back control of our financial regulatory rulebook, that we were able to act so decisively. The hon. Lady will forgive me if I do not talk about matters in the United States.

In respect of ringfencing, it was the view of the Bank of England and the Treasury, in the circumstances and to protect public funds, that to provide a permanent exemption for what is a very small part of the much larger HSBC—I think less than 1% of its pro forma clients on an enlarged basis will be former Silicon Valley Bank clients—was appropriate. I do not think it puts inappropriate levels of risk in the system. By streamlining the rulebook, and by bringing back control and dispensing it to UK regulators, with accountability to Parliament—she will know about that through her membership of the Treasury Committee—I think we can have better regulation and deliver better outcomes for the sector.

[Dame Andrea Leadsom (South Northamptonshire) (Con)]

I congratulate my hon. Friend and all who were involved in the rescue. It was vital that we acted urgently to prevent the fear and the risk of contagion that were apparent over the weekend. Does he feel that the fact that SVB UK was a separately ringfenced bank and that ringfencing is a UK-specific regulation brought to bear any protection for SVB UK? He will recall only too well, as I do, that Lehman sucked capital out of the UK when it was in dire straits, which to a large extent caused the ultimate contagion. Will ringfencing continue to protect the UK banking sector as we go forward, even through the Edinburgh reforms?

[Andrew Griffith]

My right hon. Friend speaks with great authority on these matters, and I can give her that assurance. It was constituted as a subsidiary in the UK, it had its own separate balance sheet and it was regulated as such. Because of that fact, the Bank was able to make the decisive intervention it did. There were assets within the subsidiary to which we were ultimately able to restore viability by successfully finding, over the weekend, a very large bank—Europe’s largest bank—to step in and buy, and to put its balance sheet behind, this entity.