Are we headed for another financial crisis?
This weekend's news has been dominated by headlines relating to Silicon Valley Bank (SVB) and its demise as investors rushed to pull their money out. Prime Minister Rishi Sunak has insisted that this collapse “will not trigger a new financial crisis”, but is this enough to help British investors rest easy?
What caused SVB to collapse?
While the final nail in the coffin was last week’s run on the bank, it’s important to note that the problems began much earlier as a result of poor decision-making in the management of interest-rate risk by the US banks’ executive team. And while this did ultimately infect its UK business (SVB-UK), had the US bank been subject to UK levels of regulation, the outcome might have been very different.
UK banks - including Chetwood Financial and our brands - must follow strict rules put in place by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA). While the FCA works with financial services businesses to ensure fair outcomes for consumers, the PRA’s rules require banks and other financial institutions (such as insurance businesses) to maintain sufficient capital and have adequate risk controls in place. These rules were put in place following the 2007 economic crash to ensure that history didn’t repeat itself.
So my money is safe with SmartSave?
Ultimately, yes! The reasons for this are three-fold:
• First and foremost, the regulatory environment that we operate in means that we’d never find ourselves in the same position as SVB or SVB-UK. We must maintain significant levels of liquid cash under PRA rules.
• We designed SmartSave with risk management at its heart - this means that customers can only have one SmartSave account, with a maximum deposit of £85,000 to ensure that all deposits are covered by the Financial Services Compensation Scheme (FSCS). If the unthinkable happens, you can rest easy knowing that you’ll get all of your money back.
• And finally, investors have confidence in SmartSave. We’ve recently achieved £1bn in deposits as UK savers scrambled to get the best returns on fixed-term deposits.