Last week Bank account users at SVB UK could withdraw their money or make their payments from their bank accounts safe in the knowledge that the UK Regulators thought it solvent and well run.
It had its banking  licence. Any regulated bank should have access to Bank of England funds in the event  of a sudden increase in withdrawals straining the bankâs liquid reserves available to pay out.
Last weekend the Bank of England announced its plan to put SVB into administration. This followed a similar move by the US authorities on the parent bank in the USA. It happened despite UK SVB telling people that it was ring fenced from the US operations. I thought it was meant to be independently regulated in the UK.
All this leads me to ask why did the Regulators change their mind last weekend about its solvency? Was there some requirement from the US parent that did require money from the UK Bank? Or did the Regulators discover things had gone wrong in the UK Bank?
If the UK Bank had invested in bonds which had then lost lots of money as some press comment suggests the U.S. bank had, the Bank of England would have known that in the autumn when they launched their Quantitative tightening programme on the eve of the Kwarteng budget. They had  the clear wish to drive bond prices down to get interest rates higher. When they saw their impact on LDI funds owning bonds they should also have seen the impact  on banks holding bonds direct  as investments.  If some venture capital loans had gone wrong for SVB again the Regulators should have known their exposures and asked about their bad debt position.
Whatever the banking issues there needs to be a quick fix so companies with trading money on deposit with SVB can access it to carry on their businesses. We do not want taxpayers to have to bail them all out. We want good banking  regulation and an orderly wind down of SVB if there are good reasons to take it into administration. A takeover by another bank which protects the depositors would be a good idea in such circumstances.
Update: It appears there is an agreed takeover guaranteeing deposits with no taxpayer bail out.
March 13, 2023
2008âŠor as commentators said thenâŠ
âYou ainât seen nothing yet!â.
Was this ignored/encouraged on purpose to impose CBDC?
Most importantly I supposeâŠhow contagious is this?
Follow the science lol. Theyâre good at viruses, our leaders!
Or as the Queen said âWHY did no one see this coming?â.
Well..most of us did actually.
March 13, 2023
Agreed Cuibono. Back in 2008 some were shouting fire and were ignored. Our regulator knew better… As they did on inflation, QE, bounce-back loans, etc…
This example is another cock-up on Andrew “bunter” Bailey’s watch. How many mistakes does that man need to make before aciton is taken? Oh of course for him the conseequences of failure will be a gong or a peerage.
March 13, 2023
You are quite right. My question to Sir John is do UK banks, insurers, pension funds and other financial industry players have the same regulation as in the U.S. regarding valuation of government bonds; namely there is no requirement to ‘mark to market’?
It would appear so, since the pension industry nearly fell over a few months ago.
There’s a dirty LARGE secret…
March 13, 2023
It’s not really a secret at all. Regarding pensions Legal and General spoke about this after the Truss tantrum meltdown. They hold their bonds to maturity so get the face value back. We don’t have the option to go to a pension provider and demand to have all our pension paid out at once in the same way that people can pull all their money out of a bank deposit. So they don’t run the risk of being forced sellers.
March 13, 2023
That’s all fine, so long as they didn’t borrow short to leverage a gilt portfolio as in LDI. It was the pension providers that ran into trouble a few months ago.
March 14, 2023
They will have paid a large premium to face value for many of the bonds they bought, with redemption yields that are barely positive in nominal terms, and quite negative in real terms even before inflation started taking off. It is precisely why annuities got to the point where you needed to live to 100 to see the return of your capital. Aside from that, many pension funds were investing in geared instruments that paid a multiple of the low coupon of a gilt, but with the downside that if bond yields rose, they would essentially have to cover the capital mark to market loss of the instrument provider.
March 13, 2023
Following my above, This from the CNN website:
US banks were sitting on $620 billion in unrealized losses (assets that have decreased in price but havenât been sold yet) at the end of 2022, according to the FDIC.
Gives a bit of scale. And that doesn’t include this year’s interest rate increases…
March 13, 2023
Those losses are irrelevant unless the bank needs to sell for liquidity.
Until they need to sell then the coupon will be paid and the principle is returned at term.
This is a liquidity issue not a profit/loss issue.
The pensions got screwed because they had shorted bonds
March 14, 2023
Shorting bonds would have been quite profitable as interest rates rose and bond prices fell.
March 13, 2023
+many
Agreed.
March 13, 2023
Sadly nobody knows any better
March 13, 2023
@PeteB; The ‘regulators’, including the BoE, are themselves regulated by the government, so if this is yet another failure of regulation then it is a failure of the regulator-in-chief, the UK govt, currently overseen by elected members the Tory party. I wonder how many high ranking members of the current (2015-on) government will be rewarded with a “will be a gong or a peerage” (for their failures to regulate the regulators)?!…
March 13, 2023
Regulators here and in the US are completely ineffectual. They are just there to provide a figleaf/ pretence of scrutiny.
When it is all done and dusted the big boys will, once again, walk away without punishment.
March 13, 2023
I agree with Republican critics of the US guarantee in principle.
This, once again, is socialise the losses, privatise the profits, and carries severe moral hazard looking forward.
However, the protection of ordinary people from the inherent horrors of capitalism is probably the more pressing political matter.
March 13, 2023
Yes, there was no haircut on large sophisticated investors over $250k?
So was this another stealth bailout? Was arm twisting applied in a backroom deal? No taxpayer bailout! Its all paid by the fiat currency users and or customers charges.
What triggered the run and why now?
Meanwhile bail-ins and CDBC are now the next move.
March 13, 2023
Good morning.
There are similar questions being asked over the pond as well to what is the USA’s second biggest bank failure. The tragedy is though, many investors had over the protected limit the US Government provides saved in SVB. This caused four of the largest banks in the US to lose collectively $50bn of their worth in just one day.
Once again a number of people in all areas, from regulators to the media, never saw it coming. Maybe if the US had people both at SVB and Regulators cared more about doing their jobs rather than celebrating equity and diversity, perhaps this would never happen.
SVB – Go woke and go broke.
March 13, 2023
Go woke and go broke will be on the tombstone of European civilisation if someone doesn’t soon grab this lunacy by the scruff of the neck.
With our so called education system churning out a mass of woke indoctrinated automatons into the workplace, we can expect this virus to spread through every facet of commerce and industry until it implodes.
March 13, 2023
Go woke, go green, get subsidy upon subsidy upon subsidy, go broke
March 13, 2023
I see Greta Thumberg has deleted her 2019 tweet predicting the end of the world in 2023.
Would that King Charles would undertake a deletion exercise too!
March 13, 2023
+1
March 13, 2023
In the aftermath of 2008 the banks had a real greedfest with the fake money given to them. They loaned and loaned at the lowest rateâŠfree money. None for depositors though!
Not a one of them looked after depositors.
They didnât need their money!
Will they counterfeit again ( they maybe grasp the inflation concept now?)or will they try to grab what little we have been left with via bailins?
How well has the magik money theory worked out then?
March 13, 2023
One thing is for sure, the regulators won’t be punished. I read that a lot of the larger depositors discovered what was coming and in part precipitated the already rapid collapse, by taking their money out ASAP.
As ever, the small guy loses. Our financial system system is not all it’s cut out to be. A bit like our health system…our transport system…our energy system…our system of government. All self-serving, despite the spin. There is no accountability to the Plebs, because we are not there to be served. Our function is to pay the bills until we own nothing, and be happy.
I wish I could start the week with more optimism.
March 13, 2023
Wanderer the underlying problem is that the plebs are running all of the systems you name and the elite are trying to fund it all.
Same thing happened in South Africa so I have seen it before, those unable to compete got preferential selection to State âjobsâ.
When Jack is in charge of his Master all are doomed.
Redwood is a rare outlier. We MUST take power to SELECT our candidates freely and present them to the party machines, which they will control! They will also have to control the Civil Service and cut it to the bone.
Redwood said he was asked to explain the bond market to MPs. How can they see anything coming, much less be allowed to VOTE for it to come, when they are so unspeakably ignorant?
March 13, 2023
The “small” guys are covered – anyone in the US has cover up to $250K (rather as UK has cover to ÂŁ85k).
It was the (larger) un-insured deposits that weren’t covered. The largest depositor had $3B with them. It seems SVB was very poorly managed with no hedges in place at all (none) against interest rate changes. But to put this into perspective, this is a liquidity crisis – the assets (10 year Treasuries) are there if someone with deep pockets can provide cash flow. I imagine JP Morgan will do so (but not seen anything announced as yet).
March 13, 2023
Why would anyone pay book price for an asset with much reduced market value? Its not just a liquidity issue. That IOU bond will be ravaged by inflation by the time it matures!
March 13, 2023
I didn’t expect book price to be paid Anon. I thought any non-insured depositors would take a haircut. However, the US Government has underwritten not just the $250K threshold but apparently all deposits. This seems reckless as it is potentially an open cheque.
March 14, 2023
I read that they had $80bn in mortgage backed securities that are much more risky – and can wind up in default, with near zero value in a property crash. They are even more geared to interest rates than treasuries because of that risk.
March 13, 2023
âLower for Longerâ didnât work very well for SVB then?
And apparently, this time, investors will be hung out to dry and since this bank dealt with companies who deposited their âAngel paymentsâ and then drew on that for wagesâŠ
Wages will not be paid!
Maybe some dosh should be clawed back from Ukraine?
March 13, 2023
Maybe this whole event was orchestrated to justify the Chancellors corporation tax hike on Wednesday
March 13, 2023
If the UK regulators had been doing their job they should have been on top of the situation . My understanding was for the regulators to simply not allow another financial crash by UK banks, they failed again.
March 13, 2023
The BoE was too busy trashing Truss to worry about bank solvency. Just like Hunt is out to bankrupt the country as a whole.
March 13, 2023
Indeed. I have had zero confidence in Bailey/Carney before him/the FCA or the BoE. No confidence in Hunt or Sunak either.
Reported in the Telegraph:- Jeremy Hunt will undermine Brexit by surrendering tax rights, warn Tory MPs
Chancellor told signing OECD agreement is incompatible with ‘taking back control’ as backbench rebellion grows ahead of Budget
Richard Wellings in a tweet suggests:- âThe main reason this “Davos gang” was installed is to undermine Brexit. This is why they’re sabotaging the UK economy with punitive taxes and red tape. The establishment want a demoralised country to crawl back into the EU.â
Punitive taxes, red tape & expensive unreliable energy and the total idiocy of net zero. What other possible explanation of their economic suicide agenda is there?
March 13, 2023
Good to see Rishi Suank can afford to upgrade the electricity supply for better heating of his new swimming pool at his occasional weekend constituency home, in the Guardian today. This while demanding others, many who cannot even afford to warm their bedsits freeze due to his deluded net zero policies.
Another âdo as I say not as I doâ Prince Charles type of grade one hypocrite. Not likely to win votes but then all his daft policies seem to be designed to lose votes:- Net zero, vast tax increases, endless waste, open door immigration, bloated government, dire failing public servicesâŠ
March 13, 2023
Ashley.
Not just OECD but also our armed forces are being steadily embedded into EU military and was it not Mrs May who signed us up to the UN migration compact? Next up will be the new WHO Pandemic treaty. When there is nothing left to govern will Parliament disband itself?
March 13, 2023
+1
March 13, 2023
“We do not want taxpayers to have to bail them all out.”
No, taxpayers should NOT bail them out.
Once again, the Regulator appears to have been asleep at the wheel but there will be absolutely no negative consequences for them, because there never is. They are a protected species who, no matter how badly they perform, are never penalised. Instead, we have to pay even more attention to their pontificating and prognostications which are treated as though they are Holy Writ.
Move along, don’t ask any awkward questions; just be prepared to have your wallet picked (again) by the Socialists in No.10 and No.11 to pay for the failure.
March 13, 2023
+1
March 13, 2023
The banksters are at it again. How much have they got away with this time? I smell another ÂŁtrillion on the national debt and cable fallling to $0.50cents on the pound
March 13, 2023
cable?
March 13, 2023
$/ÂŁ exchange rate
March 13, 2023
It’s a nickname for the US Dollar / GN Sterling currency pair.
March 13, 2023
Cable is the slang, short0hand term in the markets for the currency rate of exchange between Sterling (GBP) and the U.S. dollar (USD).
March 13, 2023
GBP/USD exchange rate
March 13, 2023
As soon as I read that technology start ups would suffer, alarm bells rang about the risk profile of their lending book. High risk early stage capital should never be financed by on demand consumer deposits. I wonder whether said deposits were being offered far higher interest rates than the market which is always a give away. There is always the possibility of fraud. We read senior risk management was either non existent or more occupied promoting diversity and equality.
Saying that ordinary Americans have a far greater risk appetite hoping for the next billion dollar etc unicorn so were the regulators âblindedâ by racy valuations based on froth rather than solid foundations.
Whatever the reasons the Treasuryâs record of naĂŻve support to small business resulting in the avoidable loss of billions during Covid gives me zero confidence that money wonât be thrown away again if the ridiculous Chancellorâs words offering help are followed through.
Serious diligence should be done. The problem is their officials donât have the expertise and the decision will be political not based on sound financial principles.
March 13, 2023
And âfundingâ (because the bank was itself a start-up), should never be treated like income to pay wages for instance.
March 13, 2023
Start-up? Indeed it was a start-up in ⊠1983 and was recently 16th largest bank in the USA.
What about reading âCollapse of Silicon Valley Bankâ on wikipedia just to help you write less ridiculous comments.
March 13, 2023
January last year: ‘Silicon Valley Bank, the bank of the worldâs most innovative companies and their investors, today announced it has committed to provide at least $5 billion by 2027 in loans, investments and other financing to support sustainability efforts and the company has set a goal to achieve carbon neutral operations by 2025.’
https://www.svb.com/news/company-news/silicon-valley-bank-commits-to-$5-billion-in-sustainable-finance-and-carbon-neutral-operations-to-support-a-healthier-planet
Go carbon-neutral, go broke.
March 13, 2023
+1 Carbon neutral operation – yet more virtue signalling drivel. Were they intending to use electric cars that produce more CO2 than keeping you old car and cost far more too?
March 13, 2023
Treasury and BoE interference again, artificially holding interest rates at crazily low levels.
Please, please will common sense prevail and there will not be a bail out of SVB, otherwise banks will always believe that tax payers and customers are there to benefit them, and not the other way around.
March 13, 2023
+1.
I suspect HSBC will get government inducements – one way or another.
March 13, 2023
Without doubt
March 13, 2023
I and many of my immediate circle of friends and family have become increasingly irritated by the continual attempts to interfere in the running of the BBC.
On the one hand we are continually told that the BBC must be impartial, yet a man who has donated ÂŁ400,000 to the party and is under investigation for arranging a huge personal loan to Johnson is appointed as Chairman. The Lineker controversy this weekend shows attempts from the top to censor his entirely reasonable views on the boat people issue.
Now we hear that David Attenborough’s excellent new wildlife series has also been censored because of puppetry from a handfull of far-right MP’s who disagree with his opposition to the destruction of our environment and efforts to rewild it. Sharp and his flunkey Davie must resign immediately and the politicians involved should should keep their views to themselves
March 13, 2023
The disciples of populism – on the grounds that it is “popular” – on this site might want to ask themselves who is the more popular, Gary Lineker or a millionaire Tory donor?
March 13, 2023
Who is Gary Lineker ? NLH!
March 13, 2023
Who is the least popular , Gary Linaker, a Tory Donor , NLH, or a fart in a space suit.
March 13, 2023
Well Martin, many of us complain about politicians. In order to decide on a new approach to populism reflected in political power, may I suggest that on a given GE day we should elect MPs on the basis of followers on Twit on whatever it is? Perhaps this old chap, albeit a very good goalscorer and promoter of snacking on crisps, might possibly be elected as PM? Do millionaire political donors have ‘accounts’ on Twit?
March 13, 2023
NLH
How strange that the viewing figures for MotD were up by nearly half a million, without the pundits!
March 13, 2023
Please provide evidence that the language used by Government was like that used in Nazi Germany during WW2?
It wasn’t about ‘entirely reasonable views on the boat people ‘ – it was his comment on the nature of the criticism of the Government. Reasonable? Really!
March 13, 2023
Try reading what he actually said and then argue that it was wrong. He said nothing about Nazi Germany during WW2.
Reply Germany in the 30s was under the Nazis
March 13, 2023
The Home Secretary making the point that any law passed by Parliament would be good is rather deficient in her historical knowledge: the 1933 German laws were perfectly legal having been successfully passed by the Reichstag, as the apartheid South Africa laws were, or Stalinâs laws, or Putinâs laws, or Jim Crow laws in the Southern US states, all passed by their relevant parliaments/chambers of representatives.
Morality and lawfulness are not always synonyms. In that respect Gary Lineker certainly has a point.
March 13, 2023
Habitat is being destroyed by housing developments, but you won’t hear that from the BBC.
March 13, 2023
Yep, the BBC go full eco and sustainability for their climate change religion , but oddly miss out criticising one of the critical factors the British states insane over population policy, I wonder why?
March 13, 2023
I believe the BBC and their reporting of climate change issues is showing political bias âŠ.theyâre certainly not climate neutral …..but this government doesn’t take them to task, as they agree with there position
March 13, 2023
D A
Neither will you here about the wholesale slaughter of birds and bats by wind turbines. But they will blame farmers.
March 13, 2023
It is not necessary to be “far-right” to disagree with re-wilding. Why is it ok for its proponents to express their views, but politicians (charged with running the country) “should keep their views to themselves?”
March 13, 2023
You need to get out of your echo chamber , may be take a look at Gavyn Davies, his wife Susan Nye, Greg Dyke and the donations he made to the Labour party, perhaps even take a look at the Hutton report.
In their righteous outrage the left tend to have very selective memories, there they were baying for Andrew Bridgen’s blood for saying ‘since the holocaust’ , but now flip and say Lineker’s comments are just fine, and thought it just fine that Matt Le Tissier got the sack from Sky , in fact one of the free speech martyrs from the Lineker affair, Ian Wright, was gloating about Matt Le Tissier getting the sack on his social media account.
March 13, 2023
Attenborough!! This is the man who flies all around the world then tells we plebs we must stay in our 15 min cities with no food or transport while he supports destruction of agriculture. Heâs a xxxx, remember his polar bear filming in a warehouse in London!supposedly in the Artic.
I hope in my short time left on this earth I see the demise of the BBC and ALL its flunkies, Sakara Gold!
March 14, 2023
+1 – well the demise of the evil licence poll tax and the left wind climate alarmist bias and propaganda.
March 13, 2023
The problem is that the BBC does not make its rules consistent. Lineker is a freelance broadcaster for the BBC, not a permanent member of staff, and is not responsible for news or political content. Therefore he does not need to adhere to the same rules on impartiality as news staff do. His Twitter remarks were made on his personal account, which does not include an official link to the BBC in his bio. So Lineker could say what he liked.
However, BBC guidelines also say that figures that are ‘clearly identified with the BBC’ are expected to behave ‘in ways that are consistent with the BBCâs editorial values and policies’. So Lineker, clearly identified with the BBC for the last 24 years, couldn’t say what he liked.
Also, Lineker has been mouthing off for years with his political comments, with impunity up to now. If he was going against their rules, why didn’t the BBC sanction him before?
March 13, 2023
Well the licence tax payers are forced to pay for the BBC and are entitled to see some balance. The BBC has become a left wing, big state, climate alarmist, propaganda organisation. People do not want to be forced to pay for an organisation to then use their money to propagandise to them. Kill the licence fee and then they can do what they want and people can ignore the BBC if they want to.
They are unfair competition for other broadcasters and a blatant distortion to UK democracy.
March 13, 2023
If I was paid ÂŁ1.3M per year for my services, I’d be very careful to ensure that I abided by any reasonable requesta that my client made of me. If I really felt I couldn’t do so, then I would have an obligation to take my services elsewhere.
March 13, 2023
If I was paid ÂŁ1.3M per year for my services, I’d be very careful to ensure that I abided by any reasonable requests that my client made of me. If I really felt I couldn’t do so, then I would have an obligation to take my services elsewhere. I certainly wouldn’t take someones coin and then stick two fingers up their nose.
March 13, 2023
Sakara Gold :
I agree with you that there should be no interference in the running of the BBC although I donât know how you square allowing Mr. Linekar to broadcast his comments whilst saying politicians should keep their views to themselves.
But the idea that the BBC is or can be impartial is just laughable. In 2018 the BBC announced officially it would not interview or give any airtime to any other view that we have CAGW requiring Net Zero. In fact so biased is its output on this subject that complaints of misinformation are regularly upheld by the BBC themselves.
BTW, environmentalism and CAGW/Net Zero are quite different and it is perfectly possible to agree that we need to look after the planet but not that we have CAGW requiring Net Zero.
Since impartiality is impossible I would be happy for all restrictions to be lifted as I would rather know the views of all the BBC staff, particularly those working in news and current affairs, so I can better understand their output.
March 13, 2023
The BBC and a compulsory licence fee is an outmoded concept.
I donât pay a licence and watch other TV channels on catch up. I donât miss the BBC.
âMatch of the Dayâ is scheduled after Sky have already provided free highlights on the Internet. You can pick and choose what order to view matches. You can watch managers comments and incidents separately too.
As for other sport, golf is now going the way of cricket. A free package of highlights from the PGA has been turned down by the BBC. No more full weekends of coverage of The Masters and The Open. Meanwhile, womenâs football which few people watch is pushed by the corporation. Womenâs football is listed after Premier League and before the far more popular Championship on their website.
March 13, 2023
Sakara Gold
Your second story about the Attenborough programme as aired in the Guardian, has been described as ” totally innacurate” by the BBC and even more striking as “categorically not true” by the CEO of the WWF who helped fund the series.
March 14, 2023
Who is interfering in the running of the BBC? Mr Lineker should be the prime candidate for your ire, as he has ridden roughshod over the management backed by the baying woke mob. The BBC management were incapable of holding him to his contract.
March 13, 2023
OFF TOPIC. yesterday.
Thousands of homes are without power this afternoon with properties across 10 regions of the UK affected by the outage. The worst affected area is West Sussex with almost 30,000 homes without electricity and the next worst is said to be Greater London with reports of 326 without power.
Other areas affected are Norfolk, Bedford, Cambridgeshire, Hertfordshire, Essex, Surrey, Kent, and Brighton and Hove. In Norfolk there are 169 properties without power, 98 are affected in Bedford, and in Cambridgeshire the figure is 94. Hertfordshire has 76 properties affected by a power outage and in Surrey there are 61. In Kent the number is 54, in Brighton and Hove it is 47, and there are 32 properties affected in Essex.
March 13, 2023
There are a great many illegal properties, converted garages and multi occupancy all tapping into the grid with dodgy connections âŠ.or itâs possibly the government policy of net-zero and the reduction of fossil fuelled power stations – either way this government doesn’t have a real plan nor does it care
March 13, 2023
I started reading this blog in 2008 when Sir John was (I think) the only MP in parliament to oppose the Brown bank bailout. He said – which I strongly agreed with – that failing banks should be provided with cash to meet withdrawals against collateral and should then be restructured at the expense of their shareholders and bond holders. Oh no said all the âexpertsâ that will lead to collapse of the economy (for unspecified reasons). It is interesting to note now that in neither the US nor the U.K. is there the slightest suggestion of adopting the disastrous Brown approach to SVP. SVP U.K. has been sold and SVP US has guaranteed depositors but will either be restructured or sold with equity and bond holders, but not taxpayers, taking the hit. It is some progress, albeit it would be nice to see some acknowledgment from the self-righteous statists 15 years later that they were wrong and Sir John (and a few others outside parliament) were right.
March 13, 2023
Interesting. ÂŽLibertariansâ are like house cats, they are convinced of their fierce independence while utterly dependent on a system they despise, donât appreciate or donât understand.
Link your favourite libertarian to one or more of these three characteristics.
March 13, 2023
The fundamental misconception many contributors seem to have is to think the UK, or UK authorities have any independence.
The last independent decision the UK made, was the invasion of Egypt to reverse the nationalisation of the Suez Canal. Some Nation ( who could it be ) put a stop to that.
Then, don’t forget the invasion of British territory Granada.
Since then, we’ve been allowed all the trappings of statehood, Parliament, the Monarchy, the Queen’s speech, but the UK is nothing other than a North European version of Puerto Rico.
Why on earth does London need a Silicone Valley bank ?
To the question of another commentator, ‘how contagious this is? ‘ Well, Another US bank, Signature bank has just been taken over by the US authorities.
I have occasionally wondered why Michael Foot, and recently Jeremy Corbyn never got to be Prime minister. We’ve certainly had worse. Heath, Blair and likely get worse, Starmer. But it’s probably because both Foot and Corbyn would have attempted to plot their own independent foreign policy, and step one, might have been, we don’t need fifteen US military bases in the UK.
March 13, 2023
Yet another example of why you cannot trust assurances from official bodies, especially when it comes to your health or wealth.
March 13, 2023
Money supply has gone negative in the US for only the 4th time in 130 years.
These reckless people think they can ignore monetarism.
Another very expensive lesson about to not be learned!
We MUST change the people! No reality can change the current incumbents minds!
Hunt MUST drop interest rates (yes – heâs in charge) and taxes. He HAS to get money into the pockets of the people and fast.
March 13, 2023
The BoE appears to have taken a jerky response late in reaction to recent events rather than maintaining control at a point that would have prevented the predictable and unwanted outcome.
March 13, 2023
Rather than our banks (not SVB UK) undergoing a stress test, maybe the treasury should initiate a stress test on the BoE
March 13, 2023
Ps. And now we read that the pariah, how virtue signalling politicians view it, HSBC has bailed out HMG etc by buying the company so instantly become âacceptableâ
What a wonderful example of two faced politicians devoid of moral scruples.
March 13, 2023
Lot’s of ill informed commnet this morning I’m afraid.
SVG was seeminly not only poorly managed (as a bank) but also took on risk that other banks were probably reluctant to consider. Many VCs insisted that their new ventures banked with SVC and there were incentives to do so. SVC took in very large amounts of cash during Covid and had about $160B of un-insured deposits. They placed that money in 10 year US Treasuries, which lost value when interest rates were raised. When some VCs became worried about SVC, they advised thier clients to withdraw cash which resulted in a bank run with SVC becoming insolvent.
JP Morgan/HSBC will take over SVC at no cost to Government because the assets are there (longer term) to pay for everything (US Government bonds will eventually pay back at face value). So SVG shareholders (SVG was valued at about $4B) will lose everything, small depositors will be covered to $250K, larger depositors might take a haircut (maybe 10-20c on the $1). The more risky ventures will also find it harder to raise finance. JPM/HSBC will be sure to make money from any involvement.
Very little “retail” money was involved, so there is no obvious contagion to other banks – BUT (as Warren B says) when the tide goes out, you can see who has got no pants on. There will probably be other (unrelated) issues in days to come.
March 13, 2023
Well a third US Bank (Signature) has just gone down – seems like the (un-insured) clients decided to pull their funds out. These things can take on a life of their own….
March 13, 2023
If the SVB U.K. was solvent and the BOE states, why was HSBC able to buy it for ÂŁ1?
March 13, 2023
SVB were insolvent Lynn because they had insufficient liquidity to pay depositors who wished to remove their money. However, the 10 year bonds they owned will be redeemable at face value when they come to term. So for ÂŁ1 HSBC has picked up the UK SVB business for free and just have to ensure ongoing cash flow.
It seems the US Government has gone in a different direction though and decided to underwrite all depositors….
March 15, 2023
They will have paid a large premium to par for the bonds. There are real capital losses to be covered, just as there are for the BEAPFF that finances QE bonds at the BoE. The only saving grace for the Treasuries is that ultimately they will redeem at par, which is not guaranteed for the mortgage securities they bought.
March 13, 2023
It appears that HSBC is doing with SVB-UK what financial institutions used to do years ago: take over a smaller member in trouble and keep the system going. If so, perhaps we should wish them well and hope that, under HSBC’s stewardship, their future financing is in steadier hands.
March 13, 2023
I do wonder why the Conservatives have allowed the Bank of England to get off with little or no criticism, when they dropped an ÂŁ80 billion Quantitative tightening the day before the Truss budget . The month before the MPC had stated they will only go forward with the QT policy if there was market stability , hadn’t they noticed that the Government was having to shell out a lot of money on the energy price cap, or the effects high energy prices were going to have on the economy?
ln the BoE actions I struggle to find any middle ground to explain their actions between them being stupid and incompetent or Machiavellian deviousness, the latter using the Truss budget to blame for all their policy failures going way back from QE in the banking crash, abnormally low interest rates, the second round of QE in the pandemic, and their failure to regulate the risks pension funds were running.
March 13, 2023
There’s something rotten at the heart of this which we may never get to hear about.
The way all this has been bubbling up for years, the BoE’s pension fund 100% invested in LDI funds until recently, when it reduced it to 82% as that type of bond had problems that were forseeable a long time ago…
And the interventions of the BoE… what were they saving? Their own pension fund perhaps?
And it all just happens to give them an excuse to eject Truss. Hmmmm.
Now many people on variable rate mortgages are really struggling. I hope this gives them reason to pause the rapid and massive rate hikes – these hikkes show more incompetence in my view, when the guidance in the past was that when rates did go up, it would be gradual and to “the new norm of around 3%”.
March 13, 2023
Is todayâs FTSE100 falling of 2.5% this morning (09:45hrs) due to SVB-UK or the Chancellors budget this Wednesday
March 13, 2023
The banking sector falling 4.2% (10:00hrs)
March 13, 2023
Over the last few years, banks have been quietly changing their terms and conditions so that depositors are on the hook for bail-ins. This means that depositors have dropped to near the bottom of the pecking order when it comes to getting their money back if a bank becomes insolvent. What have our regulators been doing? Also, we see that the people who ran SVB in the USA sold massive amounts of their stock just before seeking more capital for the bank. Surely this is insider trading.
HSBC buying the UK arm of the bank for ÂŁ1 looks like a repeat of what happened in 2008 with Northern Rock and RBS.
Bank shares have been falling over the last week as investors run scared. The collapse of SVB may be just the start. When and if the floodgates open then governments wonât be able to support the banking industry and the WEF will get its long-awaited Great Reset.
Make sure you spread your cash between many banks. Cyprus was just a testing ground. Itâs too easy for banks to limit withdrawals and steal your hard-earned savings.
March 13, 2023
HSBC has solved the situation with SVB UK.
That shouldn’t be the cue to let this Government, the Chancellor, the Treasury and the Bof E of the hook. The are the collective destroying the UK Economy. They donât have to destroy a whole country just because they can and they know they will get away with I. People elsewhere as now will pay, will pay big time for their ineptitude.
March 13, 2023
Pleased we now have a solution that is reported to not involve any taxpayers money being used in support for what is now being reported and regarded now as a totally autonomourse UK organisation.
Once again a banking crisis starts in the USA, do they have a problem with regulation ?
March 13, 2023
I am always upset that we are over exposed to the goings on in the USA . The politics under Biden are very anti UK and we are powerless to do anything about it . London is fast losing its place as an international banking sector and our investment scene is in the doldrums . We need a drastic turn in our political leadership to restore and establish our place in the world ; we must not be governed by the USA or the EU .
March 13, 2023
Just be grateful Sunak was in charge. Imagine if Johnson or Truss was trying to deal with this!!
March 14, 2023
If Boris were still PM it would be Sunak dealing with it. As he dealt with everything else as Chancellor, i.e. he did what the Treasury said.
March 13, 2023
The American bank SVB has lost money as well as contributing billions to ESG and other green cult causes.
Go green go bust.
The UK branch seems to be well balanced financially, but no bank can withstand a full-on run on itâs funds, so it looks logical and prudent to guarantee all depositors and avoid a damaging banking sector emergency.
The takeover by HSBC will stop any âleakageâ of funds from here to the US.
I consider both BoE and the regulators both to be innocent from any neglect of oversight in this case, how could they have known that the main bank is playing with fire?
March 13, 2023
Does the small print say there is no taxpayer bailout? Or is Gordon Brown still saving the (woke) world?
Since the Usurper has been making agreements with other countires I have not faith at all in the large print.
March 13, 2023
The worst possibility we need to rule out is this: Is HMG going to bail out startups reliant on collapsed US banks? Are we now liable for guaranteeing deposits in UK banks and anywhere else in the world? If 90% of startups fail, will they be doing so at the cost of the taxpayer? I do hope we can rule it out, but with the Usurper acting as the heir to Gordon Brown, we can’t be sure. It is all confidential.
March 13, 2023
banks and insurance companies are also something I have been inside at various levels. its common knowledge amongst those that know that several banks are not really solvent, and people only trade with them because the impact of them failing is assumed to be so bad that they would immediately be nationalised or bailed out.
sadly poor bank execs rarely feel the pain of their poor business decisions.
March 13, 2023
Like nearly everything around us the plague the virus if you like is that no one is responsible for anything and then to rub it in others âmustâ pay.
The BoE makes mistake after mistake because it will not be them in the firing line, the taxpayer is 100% their go to paymaster for their blunders. Similar the OBR, the Quangoâs yet to find the bonfire and so on.
This Conservative Government rather than fix the mess they have created in all areas they expected to manage , have so far refused to step up. There is no balanced budget in departments, just the shovelling in more of what they can grab from the taxpayer.
So is it any wonder that more and more people expect someone else to pay for themselves not trying to sort their own lives out. People want to mirror the lead handed to them by their Government.
A previous POTUS was right âask not what the Country will do for you, but what will you do for the Countryâ. Also elsewhere, âits the man in the mirror that will change the Worldâ.
Without first and foremost there being a strong resilient economy, there is no tomorrow, no future bailout just decline.
March 13, 2023
SVB Bank is/was owned by some large Mutual Funds and Capital Investment companies. You would have thought they new exactly what they were investing in! Its assets covered liabilities 109% on paper. The main problem with SVB Financial; and a lot of other Banks, was that it had an large portion of its assets in Government Bonds.
Enter Central Banks to bugger things up by putting up interest rates. When they go up, the market value of Bonds go down. Most Banks were full of deposits from the pandemic with nowhere for them to turn a penny except “risk-free” Government Bonds. SVB got caught just like LDI investors in the UK. It’s time to do away with Central Bank monetary policy; it is literally a Bull in a China shop. The natural rate of interest in a self financing fiat currency economy is zero.
March 13, 2023
There actions are just panic by those that have stolen and abused powers. Doing the right thing is not always the same as jumping in without thinking.
Is saving a failed banking system, saving anything for that matter or just delaying the inevitable. Does a few pounds saved today actually save real money in the long term.
Most of the warped thinking evolved from the interventions created by Gordon Brown. Well meaning as it was to save jobs, keep people employed the concept of the so-called âCompany PrePackâ were at best political ego trips. Each intervention rewarded those that made the mistakes, the chancers but never solved the problem.
In practice and reality each setup that gets to fail, and fails big time spawns new startups. Its called evolution. But it needs a Government that removes the protections they have in place that stops what is laughable called the established for being chalenged.
March 13, 2023
‘…the Bank of England would have known that in the autumn when they launched their Quantitative tightening programme on the eve of the Kwarteng budget. They had the clear wish to drive bond prices down to get interest rates higher. When they saw their impact on LDI funds owning bonds…’
Did the Bank of England predict the impact of their QT on LDI funds rather than ‘saw’ afterwards?
Was harming the Government which sought ‘an end to Treasury orthodoxy’, and by implication the orthodoxy of the Western governments, why they announced their QT on the eve of Kwarteng’s budget?
March 13, 2023
Sir John, on March 11 you asked ‘Why pay the French to enforce their laws?’.
Surely the 2 answers are obvious.
1) Sunak is looking ahead to the forthcoming local elections and hoping that if he seems to be doing something – anything – about the south coast invasion, your party will get more votes.
2) Sunak is looking ahead to the next general election and hoping that if he seems to be doing something – anything – about the south coast invasion, your party will get more votes.
March 13, 2023
So have they, as we all suspected they would, actually privatised the NHS?
Just received a letter saying that a Primary Care Limited firm has won the contract to run our GP surgery.
March 13, 2023
I think its part of the governments plan to create 40 new hospitals, just takeover the local GP Surgery and re-designate it âGP Surgery Hospitalâ âŠ.jobs a goodâun
March 13, 2023
It really is simple. The financial “authorities” don’t know what they are doing, along with the civil service and every other body, official or otherwise, which considers itself worthy of our respect and obedience.
March 13, 2023
Now we read that Moodyâs rating agency had given SVB an A rating up until three days ago (Mar 10). How is this possible?
March 13, 2023
Brilliant Question
March 13, 2023
It is reported that this bank has had no officer managing risk for around a year but was very good at ESG, having recruited the right number of racial and gender types, using the new pronouns. Presumably HK will reemploy them in order to keep brownie points.
March 13, 2023
On & Off topic. The problem with all the regulators is they lack authority & a willingness to use it. But that reflects the decline in Authority & respect for it over the last 50-plus years. A classic example is Gary Lineker. The BBC should fire him & all his colleagues without delay because they are challenging the BBC’s authority, but the BBC will back down. The Government should have sacked Andrew Bailey for his pathetic failure to keep inflation at 2%, but again they refuse to use their authority.
The regulator for the Water companies allows them to dump sewage in our rivers & seas because it won’t use its authority to regulate them. Likewise, illegal immigration by boat is not tackled because the Government won’t use its authority to turn the boats back to France. The Civil Servants refuse to accept the authority of the government, so work from home & the Government allows it. So why be surprised when the B of E fails to do its job in regulating SVB UK?
March 13, 2023
Is this deja vu Lehman Bros and the subsequent fall out? Ordinary folk would have thought those in charge would have learned from the calamity. However………
March 13, 2023
Yes, Sir John, I too was very surprised by the supposed problems given the fact that the UK operation of SVB was ring-fenced. Although the purchase by HSBC solves the problem we still need an investigation and explanation as I am now worried about other, supposedly ring-fenced, British subsidiaries of foreign banks, such as XXXXXX. Will you press the government to explain what happened here in more detail?
March 13, 2023
Sir John, today you will be voting on the Illegal Migration Bill. I am very concerned that this WILL NOT WORK.
In essence, however, the problem is that The Illegal Migration Bill does NOT do what it says on the tin. Although some parts of the Human Rights Act are disapplied â which is good â others are not, in particular sections 4, 6 and 10. This is FATAL. It means that once/if the Bill becomes law it will be declared incompatible with the ECHR by the courts [under section 4 of the HRA]. The government has itself admitted that it probably IS incompatible! Ministers will then no longer be able to implement it [due to section 6 of the HRA] and will be forced to water it down. In the meantime, because the government is not proceeding with the deportation flights to Rwanda, any migrants held in detention will be able to apply to the courts to be set free, both in the first 28 days [under Habeas Corpus] and after 28 days, under the provisions of the Bill itself. This is NOT the solution to the problem, it is just political posturing to win votes from the gullible.
March 13, 2023
Its all smoke & mirrors ….something about kicking the can down the road, anything rather than leave the ECHR
March 13, 2023
Amusement or irony?
As reported in the MsM
BBC ‘capitulated’ by allowing presenter to return to Match of the Day
Over his tweets about the âThe Government’s âillegalâ immigration policyâ – so it is the Government that is wrong with their âillegalâ policy
March 13, 2023
The science is settled, one can never question the policies of the BBC, and so it was written
March 13, 2023
So those who say the Bank of England does not do timely monetary policy will be able to add “does not do effective bank regulation”. What is the Bank for, aside from buying Government debt and selling it again at a huge loss?
March 13, 2023
On the subject of banks⊠did anyone see on Net Zero Watch that the Bank of England has decided to demote its Net Zero agenda and cut its spending on climate change? The idea is to enable the bank to concentrate properly on its ration dâetre.
https://mailchi.mp/bd7841146330/bank-of-england-downgrades-net-zero-and-cuts-climate-spending-194571?e=9ea36bba31
March 14, 2023
With banks collapsing left and right, with UK energy bills increasing by 2 – 300% in eighteen months, it’s so reassuring to learn that our Prime minister ( the prime minister nobody in the Tory rank and file wanted ) has paid out of his own pocket to get the power line to his property upgraded so that he can heat his own private swimming pool.
I am SO looking forward to canvassing for any other party except the Tory party come the next election,