BOE Governor Says Global Markets Are Testing Banks for Weakness

Bank of England Governor Andrew Bailey said global markets are testing “quite a lot” of the banking sector for any signs of trouble after the failure of Silicon Valley Bank and the rescue of Credit Suisse Group AG.

(Bloomberg) — Bank of England Governor Andrew Bailey said global markets are testing “quite a lot” of the banking sector for any signs of trouble after the failure of Silicon Valley Bank and the rescue of Credit Suisse Group AG.

While the UK banking system remains in a “very strong position,” Bailey said the past weeks brought “moves in markets to, if you like, test out firms.”

“I would not want to say that those in my estimation are based on identified weaknesses,” Bailey told the UK’s Treasury Committee in Parliament on Tuesday. 

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— Bloomberg UK (@BloombergUK) March 28, 2023

 

Bank shares have swung wildly in recent days along with concern about the health of the financial system. The BOE in its role as banking regulator is attempting to identify risks to the economy and defuse those.

The UK central bank stepped when SVB Financial Group, the parent of Silicon Valley Bank, failed in the US. The British unit of SVB was sold to HSBC Holdings Plc in the early hours of March 13.

Bailey described SVP’s collapse as “the fastest passage from health to death, really, since Barings” in the 1995. He’s concerned that regulators must act more quickly to either prop up or start a resolution to failing institutions in the age of social media, when rumors can spread more rapidly and lead to digital bank runs.

In a speech last night, Bailey said officials need to learn lessons from SVB because of the “speed at which runs can take place” given the technological advances since the financial crisis.

“It is striking that that happened very quickly — word gets around,” he said Monday in response to questions after a speech at the London School of Economics on Monday. “This is very different from the Northern Rock-style queue outside the branch type thing.”

Read more:

  • BOE Governor Says Bank Runs Quicker in the Age of Social Media
  • Bailey Suggests BOE Won’t Lift Rates Back to Pre-Crisis High

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