UK Treasury plans reforms to manage small bank failures after SVB collapse

Enhancements to resolution regime

The Treasury has outlined a new mechanism to enhance the UK’s resolution regime, which aims to manage the failure of small banks more effectively and limit risks to public funds.

The consultation, published today (11 January), comes nearly a year after the collapse of Silicon Valley Bank, when HSBC stepped in to buy the bank's UK subsidiary for £1 in March 2023. Under the proposals, a new mechanism would be introduced to facilitate the use of certain existing stabilisation powers to manage the failure of small banks, to shift the responsibility for certain associated costs from the taxpayer to the industry.  The government said it may be in the public interest to transfer a failing small bank into a ‘Bridge Bank', or as happened in the case of SVB UK, to a wil...