Silicon Valley Bank collapse was fastest since Barings, says BoE governor
The governor of the Bank of England has admitted he was surprised by how quickly Silicon Valley Bank failed, saying it was the fastest demise of a lender since Barings Bank collapsed in the mid-1990s.
Andrew Bailey told MPs on the Treasury select committee it had been decades since a lender had gone from “health to death” within a matter of days, saying that Barings Bank – which was brought down by the rogue trader Nick Leeson – was the only worthwhile comparison to what happened to the US tech lender.
When asked by the committee’s chair, Harriett Baldwin, whether the events that led to the rescue of Silicon Valley Bank (SVB) “came out of left field” and whether he was “taken by surprise,” Bailey agreed.
“In my experience, which goes back 30 years now, it’s probably … the fastest passage from sort of health to death, really, since Barings, actually,” Bailey said. Barings, he explained, “was a sort of Friday to Sunday thing, and this was pretty similar”.
Barings Bank, which was the City’s oldest merchant bank, collapsed in 1995, when Leeson ran up huge losses after concealing as much as £827m in unauthorised trading positions. Barings was bought by Dutch bank ING for a nominal sum of £1, though much of its assets were later sold off.
SVB, which was the 16th largest lender in the US, collapsed on 10 March this year, after failing to raise emergency funding to plug a multibillion-pound shortfall in its finances. The US bank, which was an important lender to the tech industry and venture capital investors, was struggling to keep up with an increase in withdrawals from customers who had seen funding dry up in recent months.
Fears over its health prompted a severe drop in its shares, spooking customers and causing a run on the bank,
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