An update on Flagstone & Silicon Valley Bank

Flagstone has no exposure to SVB

 

You might have seen in the news that, over the weekend, the UK arm of Silicon Valley Bank (SVB) collapsed. Yesterday, it was acquired by HSBC.

While these events are unfortunate, we want to take the opportunity to assure our account holders and adviser partners that they will have no effect on Flagstone accounts. We have no exposure to SVB, nor is it a member of our bank panel. Flagstone account holders will continue to enjoy total FSCS protection as normal.

 

What happened to SVB? A short timeline

 

2021

  • SVB saw deposits in its accounts double, to almost $190bn, as tech businesses thrived during the Covid-19 pandemic.
  • The bank invested these cash deposits into high-yield, long-term government bonds.

 

2022

  • The economy began to turn, with recessions looming globally. Central banks in the US and UK started raising interest rates.
  • As interest rates rose, bond prices fell, causing SVB’s portfolio to shrink in value.
  • Tech companies increasingly needed more cash to deal with the challenging economy. This led to growing numbers of withdrawal requests from SVB accounts.

 

2023

  • SVB didn’t have sufficient cash to redeem the requests, so it was forced to sell some of its bond portfolio at a loss.
  • This unnerved SVB customers, driving withdrawal requests even higher.
  • With SVB unable to meet the demand for withdrawals, US regulators shut the bank down on 10 March. This also led to the collapse of its UK arm.
  • Yesterday, HSBC acquired SVB’s UK arm for £1.

 

Mitigating risk & understanding your protections

 

It’s never been more important to keep your cash safe. Here are a few resources to help you understand how diversification inherently protects your cash and how the FSCS scheme offers another layer of security for your money in the UK:

 

- How the FSCS protects your deposits

- Why it makes sense to open multiple savings accounts

- How CFOs can secure their company’s cash and mitigate risk

 

This article is not advice. If you would like to receive advice on your savings and investments, consider speaking to a Financial Adviser.

 


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