The collapse of Silicon Valley Bank was the fastest failure since Barings failed in 1995 but the UK banking system is not in the same position as during the 2008 financial crisis, the head of the Bank of England has said.
Andrew Bailey, governor of the UK central bank, told British lawmakers that the economy is in a “period of very heightened tension and alertness”.
The bank boss faced questions after tech-focused Silicon Valley Bank collapsed in the US around two weeks ago.
The group’s UK arm was sold to HSBC in a rescue deal as a result, as shockwaves from the failure shook global financial markets.
Swiss bank Credit Suisse was forced into an emergency sale to rival UBS less than a week later and global stock markets slumped.
Mr Bailey said on Tuesday: “In my past 30 years, talking about the parent bank in the US to start with, Silicon Valley Bank saw the fastest passage from health to death really since Barings.
“That was a Friday to Sunday thing and this was pretty similar.
“The US authorities are still dealing with some of the consequences of the issues and the issues with regional banks which we saw with SVB.
“My very strong view about the UK banking system is that it is in a strong position both capital and liquidity-wise, it is not showing signs of problems in that respect and we have tested very extensively.”
Nevertheless, Mr Bailey stressed that the Bank was remaining “very vigilant” as the markets have sought to test how financially robust banking firms currently are.
He also told the committee: “There is a story in the SVB US case which we will get on to I am sure, about interest rate risk in the banking book – we treat that differently in our capital regime to the US.
“There was also a lot that was idiosyncratic about Credit Suisse. I don’t think that any of these features cause stress in the UK system.
“I don’t think we are at all in the place we were in in 2007/8, a very different place, but we have to be very vigilant.
“We are in a period of very heightened tension and alertness and we will go on.”
