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| SVB bankruptcy: Bank of England dismisses possibility of financial crisis. (Source: WSJ) |
Bank of England (BoE) Governor Andrew Bailey has dismissed the possibility of an existential financial crisis, describing last week's sell-off in European bank shares as investors "testing" banks and insisting the world is not in a 2008-style recession.
Mr Andrew Bailey affirmed that the UK banking sector remained “very strong”, and that the problems affecting both SVB and Credit Suisse were isolated and did not pose a threat to the wider global financial system.
Referring to the sell-off that wiped out 8.5% of Deutsche Bank's market capitalization on March 24 and wiped out 3.8% of Europe's Stoxx 600 Banks Index, the BoE governor stressed: "I think there are moves in the market that are testing companies."
Meanwhile, Mr. Dave Ramsden, Deputy Governor of the BoE said: "Things have become 'calmer'".
At the same hearing, Sam Woods, head of the BoE's supervisory department, called on the international community to tighten liquidity rules designed to ensure banks have enough cash to meet demands from depositors.
The drying up of deposits was a major factor in the collapse of both SVB and Credit Suisse. Regulators eventually concluded that both banks were unviable because they could only meet depositors’ demands for a few days.
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