🤔 Delegated Legislation Committee

General Committees

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The UK Parliament’s First Delegated Legislation Committee discussed the draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024, confirming that the former shareholder of SVB UK is not entitled to any compensation after the bank’s shares were transferred to HSBC UK Bank plc in March 2023. The swift action taken by the Bank of England and the Treasury was praised for protecting financial stability and ensuring that SVB UK’s customers retained access to their money. Concerns were raised about the Bank of England’s initial decision to put SVB UK into insolvency and the subsequent change to resolution, prompting questions about the decision-making process. The order was supported as a necessary step to conclude the resolution process, affirming the effectiveness of the UK’s banking resolution regime.

Summary

  • The Draft Silicon Valley Bank UK Limited Compensation Scheme Order 2024 was discussed in the First Delegated Legislation Committee, chaired by Carolyn Harris.

  • The order concerns the resolution of Silicon Valley Bank UK (SVB UK) in 2023, confirming that the former US shareholder is not entitled to compensation following the transfer of SVB UK’s shares to HSBC UK Bank plc.

  • Emma Reynolds, the Economic Secretary to the Treasury, explained that the Bank of England exercised its power under the Banking Act 2009 to transfer SVB UK to HSBC on 13 March 2023. This action was taken after the Bank identified severe financial distress and deposit outflows at SVB UK, triggered by issues with its US parent entity.

  • The order follows two valuations: a provisional one by the Bank of England, and an independent one, both confirming that no compensation is due to the previous shareholder of SVB UK, as the shares had no value at the time of transfer.

  • Mark Garnier (Conservative) praised the swift action and effectiveness of the UK’s resolution regime under the Banking Act 2009. He highlighted the importance of shareholders in business governance and risk-taking, supporting the order without opposition.

  • Kit Malthouse (Conservative) raised questions about the Bank of England’s decision-making process during the SVB UK crisis, expressing concerns over the initial decision to put SVB UK into insolvency rather than immediate resolution, and the subsequent shift in strategy.

  • Emma Reynolds responded by clarifying that there is no ongoing litigation related to the case and reaffirmed the successful outcome that protected depositors and avoided taxpayer support. She noted that despite initial concerns, the final outcome was beneficial, and ongoing discussions about resolution processes would continue in subsequent sessions.

  • The order was ultimately agreed upon by the Committee, formalizing the resolution process and confirming no compensation is due to SVB UK’s former shareholder.

Divisiveness

The session saw some discussions and requests for clarifications from members, yet overall, the atmosphere remained civil and consensual. The questioning mainly revolved around the specifics of the Bank of England’s decision-making process. While there was some critique regarding the procedures, no significant animosity or deep division among members was evident.