SVB collapse was ‘fastest transition from health to death’ since Barings 28 years ago, Bank of England governor says
The collapse of the US Silicon Valley Bank (SVB) was “the fastest transition from health to death” since the collapse of Barings 28 years ago, the Bank of England governor said.
Andrew Bailey admitted to MPs that the lender’s sudden demise – which also brought down its UK subsidiary – came as a surprise.
Markets were flustered by the failure, with the shockwaves eventually taking the scalp off the much larger lender Credit Suisse and upsetting other big firms like Deutsche Bank.
Trading has been calmer in recent days, but Bailey told the Treasury Committee it was still “a period of heightened tension and alertness.”
Shock: Bank of England Governor Andrew Bailey admitted to MPs yesterday that the lender’s sudden demise – which also wiped out its UK subsidiary – came as a surprise
The speed of the demise of SVB’s UK branch was exacerbated by social media posts between the founders of tech startups who banked with the company, the Treasury’s select committee heard.
They helped fuel a bank run that saw £2.9bn withdrawn from accounts in one day, Friday 10 March, before the Bank of England intervened, MPs were told.
That was the start of a frantic battle over the weekend to resolve the UK company’s future, culminating in a £1 takeover by HSBC that was sealed at 4am on Monday.
Bailey said of the US Silicon Valley Bank collapse, “It is probably the fastest transition from health to death since Barings.
“Barings was one thing from Friday to Sunday and this was about the same.”
Barings collapsed in 1995 after huge losses suffered by a single trader, Nick Leeson.
Sam Woods, head of the bank’s Prudential Regulation Authority, said: “This was an extremely high-pressure situation.”