You cannot have failed to have noticed some rather worrying headlines recently, from the collapse of Silicon Valley Bank, which led to HSBC buying its UK arm for just \u00a31, to the \u00a32.5bn takeover of Credit Suisse by UBS, in a move backed by the Swiss government.<\/p>\n
Six leading central banks, including the Bank of England, are boosting the flow of US dollars to keep credit flowing to households and businesses.<\/p>\n
While these interventions have helped to calm nerves on the financial markets to an extent, there is still an air of volatility at the moment, vividly demonstrated in recent European bank share price movements.<\/p>\n
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Sector plays down 2008 comparisons<\/h2>\n
Of course, many of the headlines will bring back unwelcome memories of the global financial crisis in 2008, so it\u2019s only natural to wonder if a brand new banking crisis is just around the corner.<\/p>\n
As a result, many prominent organisations, stakeholders and analysts have sought to offer strong assurances to consumers, businesses and investors who may be fearing the worst.<\/p>\n
Mark Yallop, former UK chief executive of UBS, told BBC Radio 4\u2019s Today programme, that UBS\u2019s purchase of Credit Suisse reflects challenges at that particular institution, as it had \u201cparticular idiosyncratic problems that relate to it specifically [and are] not reflective of broader issues in the banking markets\u201d.<\/p>\n
\u201cI think this transaction will definitely stabilise [the bank] and should bring a good degree of confidence back to the banking market more generally,\u201d he said.<\/p>\n
The European Central Bank and European Banking Authority, meanwhile, issued a joint statement, in which they insisted that Europe\u2019s banking sector is \u201cresilient, with robust levels of capital and liquidity\u201d.<\/p>\n
In the UK, the Bank of England responded to the Credit Suisse takeover by welcoming the Swiss authorities\u2019 steps to \u201csupport financial stability\u201d, and Prime Minister Rishi Sunak\u2019s spokesman said the government believes the \u201cUK banking system remains safe and well-capitalised\u201d.<\/p>\n
\u201cWe have a strong regulatory system and we have taken a number of steps over the past 15 years, together with the Bank of England, to strengthen that system,\u201d the spokesman added.<\/p>\n
Lord Turner, chairman of the Financial Services Authority at the time of the global financial crisis, has also commented on recent events and dismissed comparisons with 2008.<\/p>\n
Speaking to The Sunday Times, he said banks have much more capital than they did 15 years ago, and that the situation is very different today as the country isn\u2019t at the end of a credit-fuelled property market boom that is about to crash.<\/p>\n
What happens next?<\/h2>\n
Thankfully, the steps taken to ensure a steady supply of dollars, together with the assurances from leading institutions and experts, have helped to soothe nerves on the financial markets.<\/p>\n
In both the Silicon Valley Bank collapse and the Credit Suisse takeover, the regulators acted quickly and got ahead of events, rather than allow the situation to spiral out of control and lead to a sense of contagion across the banking sector.<\/p>\n
But these events have served as an uncomfortable reminder of how much we rely on financial institutions in every aspect of our lives.<\/p>\n
For example, the Bank of England has raised interest rates for ten consecutive months as part of an effort to tackle inflation, which stood at 10.1% in January.<\/p>\n
But in a climate of pressure on banks and rising borrowing costs, what will the Bank of England\u2019s Monetary Policy Committee do in its next meeting, and what does that mean for people\u2019s savings, investments, loans and mortgages?<\/p>\n
And while we are on the subject of savings, many will be asking whether or not they are safe in their high street bank. It is really important to stress that the system that protects savings in the event of a bank collapse is much, much tougher than it was in 2008. For example, the Financial Services Compensation Scheme protects 100% of the first \u00a385,000 you have saved in one bank, and there are similar protections in the US and European Union.<\/p>\n
The intervention also shines a spotlight on deeper problems across the financial sector, particularly in those institutions that were expecting or relying on interest rates staying low.<\/p>\n
As Richard Hunter of Interactive Investor has observed: \u201cThe scale of the response from central banks at the weekend acknowledges gaps in the system, which will leave many investors unwilling to revisit financial stocks until such time as the full extent of the problem is known.\u201d<\/p>\n
The current situation is far from ideal, and there are question marks over future monetary policy in light of the wider economic climate.<\/p>\n
Whatever happens over the coming weeks and months, rest assured that we will be at your side every step of the way, giving you the guidance and support you need to make the right financial decisions.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"
You cannot have failed to have noticed some rather worrying headlines recently, from the collapse of Silicon Valley Bank, which led to HSBC buying its UK arm for just \u00a31, to the \u00a32.5bn takeover of Credit Suisse by UBS, in a move backed by the Swiss government. Six leading central banks, including the Bank of England, are boosting the flow of US dollars to keep credit flowing to households…<\/p>\n
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