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- FTSE 100 falls from early highs, mid-caps falter
- BoE Governor insists UK banking sector is strong
- Kantar and BRC surveys show food prices keep rising
Not facing a repeat of 2008 - Andrew Bailey
Andrew Bailey insisted that we are not facing a repeat of the financial crisis 15 years ago.
“I don’t think we are at all in the place we were in in 2007-08. We are at a very different place to then.”
“But we have to be very vigilant,” he added.
Deputy governor Sir Dave Ramsden said the Bank is keeping a close eye on bank funding costs, and the consequences of those changes on households and businesses.
Back on SVB and Anthony Browne MP noted that the run at Silicon Valley Bank was so quick because “a few VC funds told all their clients to withdraw their money” in a few WhatsApp messages.
PRA chief Sam Woods said that the Bank of England felt that confidence had been lost in SVB UK, due to what happened at its parent company, even though SVB UK had the capital strength to handle its outflows.
Bailey said there "were a number of possible offers" for the UK arm SVB but by 7 to 8pm on Sunday evening there was only one realistic offer left, which ended in HSBC's takeover of the bank announced at 7am on the Monday morning.
Woods described it as a "high pressure situation."
Bailey says SVB collapse caught BoE by surprise
Over in Parliament and the Treasury Committee is quizzing top leaders from the Bank of England about the collapse and rescue of Silicon Valley Bank UK.
Asked did it come out of left-field and were you taken by surprise, Bailey agreed.
The collapse of SBV UK’s parent bank, in the US, was probably the fastest collapse the governor can remember in his 30-year career.
Bailey compares Silicon Valley Bank’s passage “from health to death” was the fastest since the collapse of Barings Bank (which failed in 1995 after rogue trader Nick Leeson ran up huge losses through unauthorised and concealed trading positions).
SVB, the governor, said “was a very fast passage to failure”.
But Bailey stressed he believed the UK banking sector is in a strong position – both in terms of capital, and liquidity.
He noted the US authorities are still dealing with some of the consequences of the issue on their regional banks but he felt Credit Suisse (SIX:CSGN) (which was rescued the weekend after Silicon Valley Bank) was “an institutional-specific issue”.
Commenting on Friday’s turmoil in the markets last Friday when Deutsche Bank’s shares took a tumble Bailey said he saw the "sharp market movements” as a sign that the strength of certain institutions is being “tested out” by the markets, rather than being based on “identified weaknesses”.
Sam Woods, CEO of the Prudential Regulation Authority, agreed that the Bank needs to think about this.
He said: “All of us can move money from our accounts in as short a time it will take me to answer this question. That is a relatively new feature of the market.”
The speed at which news can pass these days through communities, including through private messaging, is another factor, he added.
A third factor is the “concentrated basis” of the deposits at SVB UK, Woods continues – a reference to its customer base of tech start-ups.
The committee hearing continues.
Mid-cap rally falters
While the FTSE 100 is holding in the green the mid-cap FTSE 250 has tumbled now down 0.4%.
Among the fallers are Synthomer were shares have dipped over 13% after the UK chemicals group said its performance reflected “challenging macroeconomic conditions” at the end of last year and noted “subdued” demand across most of its markets.
CMC Markets has slipped a further 5% after a trading update late in yesterday's session. Lower equity volumes and lower margin institutional business in February and March were behind a warning of new net operating income guidance of £280mln to £290mln against a consensus of £323mln.
Heading the other way was Softcat which rose 5% after the London-based IT group posted £63mln in operating profit for the six months to January 31, ahead of initial expectations. The group added its full-year performance would beat previous estimates.
Peel Hunt called the numbers "very strong."
Reiterating a buy rating the broker said: "We continue to believe Softcat is the best way of playing a number of pertinent thematics, ranging from: (1) cost optimal cloud adoption; (2) reducing cybersecurity risks; and (3) the medium-to-long term resilience of DX spend."
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