THERE’S been a spate of noteworthy developments in the financial world recently.

From Silicon Valley Bank's failure, which prompted HSBC to purchase its UK subsidiary for just £1, to UBS's £2.5 billion acquisition of Credit Suisse with the support of the Swiss government…

There’s been far more developments in the news than we’ve been used to in recent years.

Indeed, six of the world's top central banks, among them the Bank of England, are increasing the flow of US currency to maintain the flow of credit to individuals and companies.

Although these interventions have, to some degree, served to ease tensions on the financial markets, there is still a sense of volatility in the air right now, which is clearly illustrated by recent price changes in European bank shares.

Sector plays down 2008 comparisons…

Unwelcome memories of the global financial crisis in 2008 will undoubtedly be triggered by many of the stories, so it's only natural to question if a fresh banking crisis is just around the corner.

As a result, many well-known organisations, participants, and experts have worked to reassure customers, company owners, and investors who might be anticipating the worst.

Former UK chief executive of UBS Mark Yallop said on BBC Radio 4's Today programme that Credit Suisse had "particular idiosyncratic problems that relate to it specifically and are not reflective of broader issues in the banking markets" and that UBS's acquisition of Credit Suisse reflected difficulties at that institution.

“I believe this deal will stabilise the bank and should restore a healthy amount of trust to the financial industry,” explained Yallop.

Meanwhile, in a combined statement, the European Central Bank and European Banking Authority emphasised that the European banking industry is "resilient, with robust levels of capital and liquidity."

In the UK, the Bank of England welcomed the Swiss government's actions to "support financial stability" in response to the Credit Suisse acquisition, and a spokesperson for Prime Minister Rishi Sunak said the government thinks the "UK banking system remains safe and well-capitalised."

The spokesperson continued: "We have a robust regulation system, and over the past 15 years we have made a number of measures, together with the Bank of England, to reinforce that system.”

In his remarks on recent events, Lord Turner, who served as the Financial Services Authority's (FSA) head during the global financial crisis, rejected parallels to 2008.

He claimed in an interview with The Sunday Times that banks now have significantly more capital than they did 15 years ago, and that the situation is very different because the nation is not currently enduring a credit-fuelled real estate market bubble that is about to collapse.

So, what happens next?

Thankfully, the measures made to guarantee a constant flow of dollars, along with the guarantees from reputable institutions and authorities, have helped to calm the financial markets.

The authorities intervened swiftly and anticipated events in both the takeover of Credit Suisse and the failure of Silicon Valley Bank rather than allowing the situation to get out of hand and spread fear throughout the banking industry.

However, these incidents have painfully acted as a reminder of how dependent we are on financial organisations in every facet of our lives.

As an illustration, the Bank of England has increased interest rates ten times in a row to combat inflation, which was 10.1% in January.

And then at its meeting ending on 22 March 2023, the Bank’s Monetary Policy Committee (MPC) voted by a majority of 7–2 to increase Bank Rate by 0.25 percentage points, to 4.25%.

Questions remain about what these increases mean for people's savings, investments, loans, and mortgages, considering the strain on banks and the increasing cost of borrowing…

While we're talking about funds, many people will wonder if their high street bank is secure for their money.

It's crucial to emphasise that the system protecting assets from bank failures is much, much harsher than it was in 2008.

For instance, the Financial Services Compensation Scheme fully insures the first £85,000 of your savings held in a single bank, and the US and EU both have comparable safeguards.

The intervention also draws attention to more serious issues plaguing the financial sector, especially those organisations that were counting on or anticipating interest rates to remain low.

According to Richard Hunter of Interactive Investor, "The size of the response from central banks at the weekend acknowledged gaps in the system, leaving many investors unwilling to revisit financial stocks until the full extent of the problem is known."

To conclude, the scenario is far from optimal right now…

And given the general state of the economy, there are concerns about monetary policy in the future.

But you can be sure that no matter what unravels in coming weeks and months, we will be by your side every step of the way, providing you with the advice and support you need to make the best financial choices.

Please don’t ever hesitate to ring me of one of my colleagues at Future Life Wealth Management on 01246 435996 or click HERE.