Why UK Took a Different Approach Than US on SVB Intervention
British policymakers have a stronger aversion to the twin risks of moral hazard and co-option of monetary policy by financial markets.
The UK facilitated the sale of the British arm of Silicon Valley Bank to HSBC.
Photographer: Chris Ratcliffe/Bloomberg
The UK authorities had little choice but to follow their US counterparts by making whole all those holding deposits at the British arm of Silicon Valley Bank. The way they did so, centered on what economists label a “private sector solution,” highlights not just the less complicated operational conditions faced by UK policymakers but also, and more interestingly, their stronger aversion to the twin risks of moral hazard and co-option of monetary policy by financial markets.
At 7 a.m. Monday, the UK Treasury and Bank of England announced that they had “facilitated” the sale of SVB UK to HSBC, a much larger bank, in a manner that protects all depositors and gives them immediate and full access to their funds. This came as a huge relief to small tech startups in particular that, like their brethren in the US, had a significant part of their banking activities at a lender widely seen as especially sympathetic to their operations.