Bank fears spark £4.8bn withdrawals as Britons pull record amounts
Bank fears lead to £4.8bn withdrawals: Britons withdraw record amounts from accounts despite FSCS protection amid concerns over US crisis
- The figure was the highest amount withdrawn since records began in 1997
- It was a stark contrast to recent years when bank deposits increased
Britons have withdrawn record amounts of cash from accounts as fears of the US banking crisis spread around the world.
As shares in US regional lenders tumbled on another brutal day for the sector yesterday, figures from the Bank of England (BoE) showed £4.8bn withdrawals from UK banks and building societies in March.
The figure, which was the highest amount withdrawn since records began in 1997, was a stark contrast to recent years when bank deposits increased – especially during Covid, as many stuck at home saved huge sums.
Monthly negative withdrawals have only occurred five times, the last being in April 2018.
Figures from the Bank of England (pictured) showed £4.8bn withdrawn from UK banks and building societies in March
Experts said the numbers show households are less willing to hold money in banks after the collapse of US lender Silicon Valley Bank (SVB) in March, which damaged confidence and exposed new weaknesses in the financial system.
A City source told the Daily Mail: ‘No doubt about it, this is big. It’s the largest take-up on a monthly basis.’
Households instead turned to other options by depositing money into National Savings and Investment Accounts (NS&I), while businesses also put their money into gilts.
A breakdown of the data showed that households deposited £3.5bn into NS&I accounts in March, the highest level since September 2020, when they reached £5bn during the pandemic.
The withdrawals come despite the FSCS savings protection covering up to £85,000 per person, per bank with an individual license.
Samuel Tombs, chief economist at Pantheon Economics, said: ‘The £3.5bn increase in cash in NS&I accounts shows that some households have shifted their savings to benefit from a full government guarantee, while corporate treasurers are holding more excess cash. seem to have assigned to gilts.’
While up to £85,000 in bank accounts are protected, there is no limit to the amount the government protects in NS&Is, making it an attractive investment in times of need.
The BoE data is the first detailed insight into how UK households have responded to the US banking crisis.
SVB went bankrupt almost two months ago, but the consequences continue to reverberate around the world amid the industry’s worst turmoil since 2008.
Last weekend, regional lender First Republic was seized by US authorities and sold to JPMorgan in an £8.5 billion deal.
It was hoped this would calm nerves, but instead the contagion spread and last night California-based PacWest became the last to fight for survival.
When trading began on Wall Street yesterday, shares fell to a record low, falling about 40 percent in minutes after the bank admitted it was looking for a buyer.
The fallout in the UK has been dampened despite a string of banks reporting deposit outflows last week.
Recession fears eased yesterday as two reports showed the economy was in better shape than feared.
Experts said the numbers show households are less willing to hold money in banks after the collapse of US lender Silicon Valley Bank (pictured)
BoE data showed that lenders approved 52,011 mortgages for home purchases in March.
That was a sharp increase from 44,126 in February and the highest since October in the wake of the mini budget that triggered a credit crunch.
A separate report from S&P Global showed that the largest UK service providers grew the fastest in a year.
Economic director Tim Moore said: “Strong growth in the services sector meant that the UK economy started the second quarter of 2023 on a positive note.”