Silicon Valley Bank collapse leads to questions for regulators – Financial Times

Today’s top stories

• Xi Jinping pledged to strengthen China’s security and build the military into a “great wall of steel” as the president closed the National People’s Congress. In more reassuring news for markets, Xi kept the country’s central bank governor Yi Gang in his post and retained his finance and commerce ministers.

• Pfizer agreed to acquire oncology-focused biotech Seagen for $43bn, the largest pharma transaction since AbbVie agreed to buy Allergan in 2019. Analysts say the deal signals a rebound in mergers and acquisitions following a dip in activity last year.

• UK chancellor Jeremy Hunt said his Budget would put Britain on the “hard road to recovery”. Disrupted Times will have all the details on Wednesday, but in the meantime, here are five things to look out for.

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Good evening.

As you might expect from the FT, one story towers over everything today: the fallout from the collapse of Silicon Valley Bank — the biggest US bank failure since 2008 — and what it means for markets, the tech sector, regulation, interest rates and the politics of bailouts on either side of the Atlantic.

The specialist tech lender imploded last week after a sale of $20bn of securities to mitigate a sharp drop in deposits focused investors’ minds on the bank’s vulnerabilities. They dumped its stock, customers withdrew their funds and by Friday morning the bank was bust. Here’s how the saga unfolded.

US regulators, which are facing questions over whether they missed signs of mounting problems, yesterday set out emergency measures to protect the banking system, while the Federal Reserve announced a new lending facility to provide funding to eligible institutions and the search began for a potential buyer. (Here’s our explainer on the rescue package and why it differs from the bank bailouts of 2008.)

Today began with news that HSBC had bought SVB’s British arm for £1 in a fire sale after all-night talks involving Prime Minister Rishi Sunak and the Bank of England.

Meanwhile, in financial markets, speculation grew that the collapse might make the Fed slow down, or even pause, its programme of aggressive interest rate rises. This sent government bond prices soaring, with the yields on two-year Treasuries, which move in the opposite direction to prices, recording their biggest one-day drop since 1987. Fears of contagion meant bank stocks continued to fall in the US and Europe.

SVB played an important role in tech investment in the US, where one investor described it as “like a left ventricle” for Silicon Valley’s financial scene. As Michael Moritz of venture capital firm Sequoia Capital writes today, SVB stepped in when everyone else ignored the sector and its collapse leaves a huge hole for the start-up scene. It was also of critical importance in the UK: some start-ups warned before today’s HSBC deal that they might not be able to pay wages and bills.

Politicians moved swiftly to reassure the public. US president Joe Biden today vowed to do “whatever is needed” to protect bank deposits and said he would seek to “strengthen the rules for banks to make it less likely this kind of bank failure would happen again”.

And in the UK, just 48 hours away from a Budget that is meant to emphasise stability, chancellor Jeremy Hunt was quick to assert that deposits would be protected “with no taxpayer support”.

Governments are all too mindful of parallels with the 2008 global financial crisis and in particular the debate around moral hazard.

The rescue may be a pragmatic move to protect blameless depositors, says FT Innovation Editor John Thornhill, but some will take exception to helping an industry that often rails against regulation and tycoons who appear to favour the privatisation of profits and the socialisation of losses.

Or as Thornhill puts it: “There are few libertarians in a financial foxhole.”

Need to know: UK and Europe economy

E-bikes and frozen berries are in, and alcopops and king-size fags are out: it’s the annual update of goods and services the UK uses to calculate inflation.

Our Big Read explains how UK employers have made much greater use than expected of post-Brexit migration rules to bring in skilled workers. Companies are also turning to TikTok to help ease shortages in a government-backed initiative called Generation Logistics.

Economics reporter Valentina Romei examines efforts across the EU to boost women’s employment. Within the bloc, only 68 per cent of women aged between 20 and 64 are in work — 10 percentage points less than the proportion for men, according to OECD data.

Need to know: Global economy

Central banks’ digital currency plans are encountering resistance from the public who view them as an encroachment into their private lives and are unsure about their benefits.

The third anniversary of the World Health Organization’s declaration of a coronavirus pandemic was marked by an open letter from political figures, activists and academics arguing that vaccine inequality had led to many preventable deaths.

China’s share of cobalt production is set to increase from 44 per cent to half of global output over the next two years. The increase comes despite western efforts to gain control over supply chains for critical minerals. Columnist Rana Foroohar says securing rare earth supplies means the US and its allies need to ramp up dirty industries at home or partner with problematic bedfellows abroad.

Saudi Arabia and Iran agreed to restore full diplomatic relations under a China-brokered deal, catching many across the Middle East by surprise.

South Korea’s plans to boost the working week from 52 to a maximum 69 hours to combat problems posed by an ageing population and a declining workforce are on the end of a backlash.

Need to know: business

US private equity group Silver Lake agreed to buy software company Qualtrics for $12.5bn alongside Canada’s largest pension fund in the largest private equity buyout of the year.

Saudi Aramco, the world’s biggest oil major, reported record profits of $161bn in 2022 — described by its boss as “probably the highest net income ever reported in the corporate world” — as it cashed in on surging crude prices.

Porsche is pushing for an exemption for cars that run on synthetic or e-fuels from the proposed EU ban on the sale of combustion engine vehicles by 2025.

The owners of family businesses are having to adapt to invest and bring in talent as well as plan carefully for succession. Our Big Read explains why.

After multiple Oscar nominations for blockbusters such as Top Gun: Maverick, the big Hollywood studios are hoping their box office success could help the fightback against streaming and bring viewers back to cinemas.

Our film on how banking and predatory lending has widened social inequality in the US won a best video award from the business journalists’ association, SABEW.

The World of Work

Do corporate cutbacks threaten to reverse diversity gains? Have CEOs lost patience with hybrid working? And should we be more worried about remote monitoring? Read more in our special report: The Modern Workplace.

The quiet radicalism in Cal Newport’s books on productivity and his coping strategies for stressed workers have helped him sell more than 2mn copies in 40 languages, making him a celebrity in the field. What does he know that we don’t?

Leaks of WhatsApp conversations among politicians during Covid have shone some light on the UK’s handling of the pandemic. But has the pervasive app helped make work more unpleasant for its 2bn-odd users?

Do you hold grudges against certain colleagues? Miranda Green says keeping a shitlist can help you survive the humiliations of office life.

Some good news

Cambridge university’s spurting mussel movie may have missed out on Oscar nominations but the observation for the first time of how the unio crassus squirts jets of water to increase the chances of its larvae attaching to the right host fishes brings new understanding of how the species completes its life cycle and implications for its conservation.