Labour calls for review of impact of financial sector uncertainty on UK
Jeremy Hunt, chancellor, was on Monday night urged by the opposition Labour party to tell MPs what he is doing in conjunction with the Bank of England to ensure the stability of the British banking system.
Tulip Siddiq, shadow City minister, wrote to Hunt saying he had a duty to the public and the UK financial services sector to implement a series of measures following the problems at Silicon Valley Bank and Credit Suisse.
The Treasury said Hunt had been in regular contact with Andrew Bailey, governor of the Bank of England, who had reassured the chancellor that the British banking system was “safe and sound”.
Rishi Sunak, prime minister, has also been kept informed of developments by the Bank of England. Sunak was involved in overseeing the fire sale of SVB’s UK arm to HSBC last weekend.
Siddiq wrote to Hunt asking him to commit the Treasury and BoE “to a systemic review of the impact of interest rate rises and the wider uncertainty in the global financial system on our financial sector and banking system”.
She urged him to set out how he was working with the BoE, regulators and international partners “to mitigate risks in our financial system”.
Siddiq also asked Hunt to say what he was doing to ensure that start-ups in the UK had access to the “patient capital they need to grow and thrive”, reducing their concentrated exposure to banks like SVB UK.
The Treasury said that post-Brexit reforms to the EU Solvency II rules would help release more capital from insurance companies to help tech companies grow.
Hunt’s allies added that the chancellor and Bailey were already handling the issues raised by Siddiq. “It’s nice they’ve woken up,” said one.
The chancellor will face questions about his approach to City regulation on Tuesday when he appears before the House of Lords economic affairs committee.
Hunt has launched a series of regulatory reforms, dubbed the Edinburgh reforms, which aim to relax some EU-era rules.
Meanwhile, a financial services bill, currently in the upper house, will introduce a secondary “competitiveness and growth” objective for regulators, alongside their duty of maintaining financial stability.
Hunt is expected to face questions about whether his deregulatory agenda is still appropriate at a time of uncertainty in the financial markets and after a number of bank collapses.