LONDON, March 15 (Reuters) – The collapse of Silicon Valley Bank has shown the need to build a larger and more diverse financial system by bolstering the stock market and unlocking cash in pension schemes, Britain’s finance minister Jeremy Hunt said on Wednesday.
Following the collapse of its parent company in the United States, Silicon Valley Bank’s UK arm was sold to HSBC over the weekend to avoid disrupting its customers in Britain. SVB was heavily focused on lending to the technology sector.
Fallout from the collapse continued to roil banking shares in Europe on Wednesday.
Referring to current volatility in markets on the back of rising global interest rates, Hunt’s budget said regular stress testing by the Bank of England means that UK banks are “well placed” to weather economic shocks.
The “wider UK banking system remains safe, sound and well capitalised”, it said.
But the rapid sale of SVB’s UK unit last weekend showed that “we need to build a larger, more diverse financing system, where the benefits of investment in high growth firms are available to more investors”, Hunt said.
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Hunt said he would make a statement in the autumn on how the UK financial system would be strengthened.
“It will include measures to unlock productive investment from defined contribution pension funds and other sources, make the London Stock Exchange a more attractive place to list, and complete our response to the challenges created by the U.S. Inflation Reduction Act,” Hunt told parliament in his budget statement.
City Minister Andrew Griffith has said that an accounting rule for defined contribution pension funds has become a “performance penalty” which holds back investment in Britain.
A decision by UK chip designer Arm to only list in New York has dismayed the City of London, triggering calls for faster reforms to help the capital’s financial district compete better with leader New York in global tech listings.
UK listing rules have been amended after Britain left the European Union in 2020 and Britain has set out a welter of proposed post-Brexit changes to capital market rules known collectively as the Edinburgh Reforms.
The financial sector has called for faster implementation of the proposals after Amsterdam overtook London as Europe’s biggest share trading centre.
On Wednesday, the government said it would continue working with the financial sector to consider possible reforms to simplify the value-added tax (VAT) treatment of financial services “with the aim of reducing inconsistencies and providing businesses with greater clarity and certainty”.
The government said it remains committed to disposing of by 2026 its now-minority stake in NatWest Group, acquired during a bailout of the lender during the 2007-09 financial crisis.
Reporting by Huw Jones; Editing by William James and Catherine Evans
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