I have no wish to detain the Committee, but I do have some questions about the particular process we are discussing, not least because, as I understand it, it was the first time that the Bank of England had used its resolution powers as they currently stand. What happened has wider implications that we need to think about for the health of financial services in the City of London.
My first question is this: could the Minister confirm that there is no litigation outstanding either in the UK, or contemplated in the UK or in the United States, that this measure seeks to obviate? If that is the case, will she elaborate a little more about the decision making of the Bank of England during the process? Although she outlined what happened at a very high level, she did not fill in all the detail. For example, as I understand it, Silicon Valley Bank UK Ltd, the subsidiary, was a perfectly solvent banking entity within the UK. It applied for £1.8 billion of liquidity funding to the Bank of England when its parent was getting into trouble. A decision was made by the Bank of England at that point to deny funding to that bank. Has there been any review of that decision? Is the Treasury aware of why the funding was not made available? What assessment was made by the Bank? In future, if other banks apply for similar liquidity funding when overseas parents are in distress, what criteria will be applied so that everybody knows exactly what they are doing?
The Bank then initially made a decision to put SVB UK into an insolvency procedure—it did not immediately go for resolution—and in that insolvency procedure, obviously depositors were due to get their £85,000 as guaranteed, or £170,000 for joint accounts. But something changed over the weekend, because by the Monday, the Bank had changed its tune and was going for what has now resulted, which is the sale to HSBC for nothing. Do we know why it made that initial decision? My guess is that it changed its mind because the depositors went nuts. Lots of tech start-ups had large deposits with that SVB UK, and much of it had been money raised from shareholders. There was obviously quite a lot of political intervention, but what were the influences on the Bank’s decision making? If it changed its mind because the Treasury, the PRA or the FCA said that it should change its mind, why was its initial decision therefore deficient? What does that say about the Bank of England’s decision making?
Finally, given that that was the first time that those powers were used, I wonder whether there has been a review by the Treasury—as one might expect in such a petri dish experiment situation with such a valuable industry—as to whether what happened was overall beneficial both to the UK economy and to financial services. The Minister will understand that financial services are extremely valuable to this country and that anything that creates a sense of instability will detract from the attraction of the UK for financial services. The structure of Silicon Valley Bank, specifically—that it had a subsidiary in the UK, rather than a branch—was meant to promote the sense of stability and independence of regulation that would, in theory, have allowed it to trade independently.
All those questions need to be asked. If there has not been a review, I would be grateful if the Minister, given that she is new to the job, might acquaint herself with the issues in a little more detail and satisfy herself that this measure is not a negative for overseas banks establishing branches here, because since this situation, I cannot see —I have had a look, although I may have missed it—that any overseas bank has done so. If they have not, is this why?