Silicon Valley Bank

A short note on recent events which you may have heard of involving a run on the Silicon Valley Bank in California. The bank was involved in funding tech companies in the US and suffered heavy losses on bonds due to rising interest rates. They are now going into administration in the US and the Government there are trying to arrange a private bailout from other institutions. HSBC have already announced they have bought the UK operation for £1 to guarantee all UK depositors money.

Markets have been wobbly over the last few days but it is very clear that this is not a Northern Rock type scenario affecting High Street banks. The UK regulator and Government have overhauled banking regulations here to ensure our banks are robust and none are deemed to big to fail. They regularly carry out stress testing so I am not remotely concerned about UK banks running into difficulties and nor should you be, despite what you may hear in the news.

In the meantime, this recent fall in markets has presented an opportunity for those clients that have not topped up pensions or ISA allowances yet, so please drop me a line if you would like to arrange this before the tax year end on 5 April. It is disappointing for the US and UK markets to fall back on this recent news as they have been staging a good recovery of late on the back of good news of inflation starting to lag and hopefully interest rates topping out.

I would just add that although depositors in the bank are protected, anyone that has invested or lent money to Silicon Valley Bank will lose money. We do not know about this aspect yet and I would not be surprised to hear that some investment banks might be about to lose out which will drive markets on each announcement.  Silicon Valley Bank had a market value of c$6 billion in the S&P500 which is itself valued at $32 trillion dollars. If it made up more than about 0.02% of any client portfolio, I would be very surprised to hear it. 

I would just re-iterate the stock guidance I give to everyone which is do not keep more than £85,000 in one bank and avoid banks you have never heard of. Use National Savings instead. You can put £50,000 into premium bonds and £1m into NS&I Income Bonds which currently pay 2.9% on instant access. These are fully backed by the UK Government.

I am expecting a busy week with the budget taking place on Wednesday and I may send another message if there are any announcements of particular note. We do know that capital gains tax free thresholds are reducing so if you are sitting on large capital gains it is worth looking at this and realising them before the 5 April. If you would like to discuss this, please let me know.