On 10 May 2023, HM Treasury published a letter from the Economic Secretary, Andrew Griffiths, to the Chair of the House of Lords Economic Affairs Committee, regarding further adjustments to the ring-fencing regime in connection with the resolution of Silicon Valley Bank UK (SVB UK).
The letter notes that the draft Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) (No. 2) Order 2023 has been laid by Mr Griffiths in both Houses of Parliament, under section 75 of the Banking Act 2009. The draft affirmative Order amends the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014 to allow SVB UK to remain exempt from the ring-fencing regime on an ongoing basis.
Under existing legislation, the Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) Order 2023, SVB UK already benefits from a four-year transition before it becomes subject to ring-fencing requirements. This provided HSBC with an exemption to the ring-fencing regime to allow HSBC’s ring-fenced bank, HSBC UK Bank plc, to provide intra-group lending on non-arm’s length terms to SVB UK, in order to facilitate the sale of SVB UK and to ensure HSBC UK could provide liquidity support to its new subsidiary.
This second ring-fencing exemption was a necessary condition of the sale, and the letter notes that it is crucial to protecting the taxpayer, depositors and financial stability. It is intended to ensure that SVB UK can be a commercially viable and stand-alone business as part of the HSBC group. The exemption is subject to conditions, specified in the Order, relating to the size of SVB UK’s core deposits and to the type of business it can undertake. The wider HSBC group remains subject to the ring-fencing regime.