The collapse of America’s Silicon Valley Bank (SVB) was ‘the fastest passage from health to death’ since the fall of Barings 28 years ago, the governor of the Bank of England has said.
Andrew Bailey admitted to MPs that the sudden demise of the lender – which also doomed its UK subsidiary – came as a surprise.
Markets were thrown into turmoil by the failure, with the shockwaves ultimately claiming the scalp of much larger lender Credit Suisse and rocking other big firms such as Deutsche Bank.
Trading has been calmer in recent days but Bailey told the Treasury committee that it was still ‘a period of heightened tension and alertness’.
Shock: Bank of England governor Andrew Bailey admitted to MPs yesterday that the sudden demise of the lender – which also doomed its UK subsidiary – came as a surprise
The speed of the demise of SVB’s UK branch was exacerbated by social media messages between the tech start-up founders who banked with the firm, the Treasury select committee heard.
They helped fuel a bank run in which £2.9billion was pulled from accounts on a single day, Friday, March 10, before the Bank of England stepped in, MPs were told.
That kicked off a frantic weekend scramble to resolve the British firm’s future, culminating in a £1 takeover by HSBC sealed at 4am on Monday.
Bailey said of the collapse of America’s Silicon Valley Bank: ‘It’s probably the fastest passage from health to death since Barings.
‘Barings was a Friday to Sunday thing and this was pretty similar.’
Barings collapsed in 1995 after huge losses incurred by a single trader, Nick Leeson.
Sam Woods, who heads the Bank’s Prudential Regulation Authority, said: ‘This was an extraordinarily high pressure situation.’
