How banks can and do break

How banks can and do break

The Swiss central bank moved just days after regulators in Washington had to take control of two US banks, and HSBC swooped in to pick up the UK arm of one of them for 1.

It feels eerily like the days leading up to the financial crisis: cracks appearing in the financial pipes, prompting questions about whether or not they will burst, as they did nearly 15 years ago.

Larry Fink, the founder of Blackrock, said that we may be in for a slow rolling crisis that could see hundreds of small banks go bust, like the savings and loans crisis of the 1980s when more than 1,000 smaller US lenders went under.

Noel Quinn, the chief executive of HSBC who is the new owner of Silicon Valley Bank UK, disagreed. He said the authorities - in this case the Bank of England and the UK Treasury had acted swiftly to find a solution as did their US counterparts in taking over the US parent bank.

It's clear that international regulators have learned speed is of the essence, which is just as important as it is in the last crisis.

Technology bosses in the US admitted they had debated on whether to take deposits from Silicon Valley Bank. Thanks to the social media grapevine, they all did, breaking the bank in a matter of minutes.

If nothing else, these outbreaks of instability make it clear that when you reverse nearly 15 years of close to zero interest rates things can and do break. The most jittery of the weakest organisations are the ones that are most at risk, and both depositors and investors are perfectly rational in being extremely jittery.

More questions remain around the other big teaching points from the last crisis, such as whether the central bank ambulance will always arrive in time, and whether that assumption has made people too relaxed in the face of lurking financial danger.