My Lords, I beg to move that the Committee do consider this order, which is related to the 2023 resolution of Silicon Valley Bank UK Limited. This order confirms that the former shareholder of SVB UK is not entitled to compensation following the transfer of the bank’s shares to HSBC UK Bank plc.
As noble Lords know, in early March 2023, SVB UK experienced severe financial distress, resulting in rapid deposit outflows. This crisis, originating from its US parent entity, quickly spread to its UK subsidiary. By Friday 10 March, the Bank of England, acting as the resolution authority, declared its intention to place SVB UK into a bank insolvency procedure, absent any meaningful new information.
Over the subsequent weekend, a private sector purchaser was identified. On Monday 13 March, the Bank of England exercised its power under the Banking Act 2009 to transfer the shares of SVB UK to HSBC UK Bank plc. This action was taken following consultation, with the Prudential Regulation Authority, the Financial Conduct Authority, the Treasury and the Bank of England reaching the judgment that the resolution conditions set out in the Banking Act had been met.
The Banking Act requires the Treasury to make a compensation scheme order when the private sector purchaser power is exercised. This order is a mechanism to establish in law what compensation, if any, is due to former shareholders of the resolved firm. The Bank of England undertook a provisional valuation when placing SVB UK into resolution. That valuation found that SVB UK’s shareholder would not have made any
recoveries had the firm been placed into a bank insolvency procedure, and therefore no compensation is due to SVB UK’s former shareholder. The Bank of England then commissioned an independent valuation of SVB UK, which confirmed that no compensation is due to the previous shareholder of SVB UK. The order before us today confirms in law the findings of these valuations: that the former shareholder of SVB UK is not due any compensation.
The compensation scheme order for SVB UK is a necessary step to formalise and conclude the resolution process and confirm that no compensation is due to the former shareholder. This decision is based on thorough valuations and adheres to the legal framework established by the Banking Act 2009. I beg to move.