Financier Huw van Steenis has warned that the collapse of Silicon Valley Bank (SVB) has had the same impact on markets as a 1% interest rate rise.
Van Steenis is currently the vice chair at Oliver Wyman and was formerly the senior adviser to the CEO at UBS.
Van Steenis previously served as senior adviser to Mark Carney, the then Governor of Bank of England where he led a review on the future of finance.
Yesterday, HSBC announced that it had swooped to buy the UK arm of collapsed US Silicon Valley Bank, bringing relief to tech firms who warned they could go bust without help.
The Government and the Bank of England led the talks and worked through the night to scramble together the deal, which involved no taxpayer money. HSBC paid just £1 for the SVB’s UK arm.
Van Steenis speaking on the Today programme on Radio 4, said: “Given this shock to the system I think the price and availability of lending is going to creep up.
“Financial conditions [will also] tighten. I think this is why people’s expectations for interest rates are changing.
“The shock we’ve seen to the banking system is as if interest rates have just gone up 1% overnight. It’s that big a sucker punch to the system.”
He further added that the impact on interest rates could be significant, similar to what happened in 1984 when Paul Volcker, former chair of the Federal Reserve of the United States, stoped raising interest rates and within six months cut them.
Van Steenis also predicts that there will be a “flight to quality” and smaller banks will see their deposits go to the bigger ones.
