LONDON, Jan 11 Reuters Britain39;s finance ministry plans to introduce new procedures to manage the failure of small banks more effectively, it said on Thursday, following last year39;s highprofile collapse of U.S.based Silicon Valley Bank SVB.

The consultation on the proposals comes less than a year after the sudden collapse of Californiabased SVB sent shockwaves through financial markets. HSBC stepped in to buy the UK arm of SVB for a symbolic one pound last March.

The proposals would require the industry to meet some costs associated with the bank failures rather than the taxpayer, Britain39;s Treasury said.

The government believes that it may be in the public interest to transfer a failing small bank into a Bridge Bank or, as happened with SVB UK, to a willing buyer, rather than place such a bank into insolvency.

But this could pose risks to taxpayers given the potential need for such a bank to be recapitalised, the Treasury said. To address this, the proposals provide more options in terms of sources of capital for a resolved financial firm.

The new process would allow the BoE to use funds provided by the banking sector to cover costs associated with a resolution, including those associated with recapitalising and operating the failed bank, it added.

The BoE welcomed the proposals in a separate statement.

Britain39;s resolution regime for banking institutions aims to ensure public funds are not put at risk in resolving a failing bank. It was first put into…