Silicon Valley Bank

Stewart Hosie Excerpts

Monday 13th March 2023 Commons Chamber

[Mr Speaker]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

One of the key lessons of the 2008-09 financial crash was that the conduct of business and liquidity issues could very quickly morph into systemic risk with contagion across a variety of transmission channels, so I very much welcome the speedy way in which the SVB UK issue was resolved over the weekend. However, that bank’s business model—and it is not alone—involved it holding a large number of low-interest-bearing bonds at a time of rising bond yields. It was required to sell those at a loss, which exacerbated the liquidity problems that it had. Would it not be prudent now to ensure that our regulators have another look at UK banks to ensure that comparable low-interest-bearing assets are stringently priced and marked to market to ensure that tier 1 capital is just that, and of sufficient quantity and quality that any liquidity problem does not morph into an insolvency and system risk problem?

[Andrew Griffith]

I thank the right hon. Gentleman for his recognition of the speed and decisiveness with which the whole Government have come together, worked together and acted to deliver this outcome—that is kind of him and it is appreciated. If I may, we should not conflate some of what we read about the balance sheet in the US with the regulated balance sheet in the UK, which was a separately regulated balance sheet. Again, on the business model in the UK and the backing, and the bonds and collateral that were being held, I am not aware that their forced sale, and the losses on it, were a contributory factor. The reality is that we saw a withdrawal of deposits. The Bank had the ability, because of the relatively ringfenced balance sheet, to protect the bank and take the necessary action. Had the Bank not done so, we could have been in a very different situation, so we were right to act as we did.