Why the collapse of Silicon Valley Bank is a timely reminder about how to hold cash savings

Posted on

The collapse of Silicon Valley Bank (SVB) on 10 March represented the biggest failure of a large financial institution since the global financial crisis. And, when UBS had to step in to buy Credit Suisse just days later, fears of a repeat of the 2008 financial crisis began rising.

While the system remained stable, this major upset in the banking industry raises an important point about how you should hold your assets, particularly your cash.

Read on to find out more about SVB’s collapse and for a reminder as to the protection you have for your cash savings.

SVB sold $2.5 billion in shares and caused panic that led to their collapse

Though it only took 48 hours of panic for SVB to collapse, the crisis was rooted in financial decisions made several years before.

Like many other banks, SVB heavily invested in government bonds when interest rates were close to zero. At the time, they appeared to be a safe investment, but when inflation spiked and the Federal Reserve raised interest rates to combat it, the value of bonds plummeted.

Additionally, higher interest rates increased borrowing costs, putting more financial pressure on the many tech startups that banked with SVB. These companies began drawing down more of their funds to cover increased debt repayments and operational costs.

The collapse was sparked when SVB announced they were selling $2.25 billion in new shares to recoup the losses and plug the financial gap. This caused panic among SVB customers, who started withdrawing their cash in large amounts, sending the bank into a downward spiral.

SVB share prices dropped 60% on Thursday 9 March, causing other bank shares to fall too as concerns of a financial crisis grew.

By Friday morning, SVB had stopped trading shares and given up on efforts to raise more capital and find a buyer. At this stage, regulators stepped in and placed the bank in receivership under the Federal Deposit Insurance Corporation. Essentially, this means the bank was liquidated and remaining assets were used to pay back depositors and creditors.

US regulators also agreed to cover customers’ deposits if there were not enough remaining assets to foot the bill, but investors in SVB stocks and bonds were not protected. HSBC stepped in to buy the UK arm of SVB for £1 to protect the deposits of UK customers.

As you followed the situation unfold on the news, you may have wondered what would happen to your cash savings if your bank went the same way.

The Financial Services Compensation Scheme (FSCS) offers limited protection for your savings

Fortunately, there are protections in place if a bank or other financial institution collapses, so your savings will likely be safe. However, it’s worth remembering that protection is limited, and if you hold a large amount of cash, the FSCS may not cover the full amount.

In the event of a collapse, the FSCS protects up to £85,000 per eligible person, per institution, or £170,000 for joint accounts.

In certain cases, they may protect qualifying temporary high balances up to £1 million, but only for six months after the money is deposited. This accounts for things like:

  • Compensation payments
  • Property transactions
  • Redundancy payments
  • Inheritance.

One important thing to be aware of is that different accounts with banks that are in the same banking group – sharing the same banking licence – are treated as one bank by the FSCS. Consequently, the compensation limit applies to the total money across all accounts.

Some common examples of institutions that share a banking licence include:

  • HSBC and First Direct
  • Halifax, Bank of Scotland, and Birmingham Midshires
  • Virgin Money, Clydesdale Bank, and Yorkshire Bank
  • Nationwide Building Society, Cheshire Building Society, Dunfermline Building Society, and Derbyshire Building Society.

So, if you held £85,000 with Halifax, Bank of Scotland, and Birmingham Midshires, the FSCS would only protect £85,000 of your savings (£170,000 if you have a joint account).

If you are not sure which banking group owns your bank, you can use this simple search tool from Which? to find out. You can also use the FSCS protection checker to see if your money is protected.

If you do have more than £85,000 in a single account (or across multiple accounts within the same banking group) you may want to consider moving some of your savings to different institutions, so you are fully protected by the FSCS in the event of a failure.

Cash may not be the safest option

Even if you have less than £85,000 in savings and the FSCS will automatically protect you if something happens, holding large amounts of cash could be slowing your progress towards your goals. That’s because inflation could reduce the value of your money in real terms.

Figures from Finder show that the average savings account interest rate in 2022 was 0.56%, while inflation was 9.1%.

As a result, if you leave your money in a savings account and inflation continues to outpace interest rates, your spending power decreases in real terms.

For example, the Office for National Statistics reported that, in the year to February 2023, inflation stood at 10.4%. That means £100 of goods and services a year ago cost, on average, £110.40 today.

As of 27 March 2023, Moneyfacts reports that the highest interest rate available on an easy access savings account is just 3.4%. Had you invested £100 a year ago, you’d have £103.40 now.

As you can see, the value of your cash has fallen in real terms – you can’t buy as much today as you could a year ago.

If you are saving for the medium to long term – typically five years or more – investing your money instead may give you greater potential for growth and more chance of outpacing inflation.

Get in touch

If you want to ensure your cash is protected, or you’d like to explore alternatives to savings accounts, we can give you the advice you need.

Email enquiries@blackswanfp.co.uk or contact your adviser on 020 3828 8100.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.


We aim to keep our clients up to date on interesting and relevant financial news.

You can sign-up to receive our monthly newsletter by email, even if you’re not yet a client. Sign-up using the form below.

Client testimonials

I have always found Black Swan to be caring and understanding of my quirky lifestyle. I always feel they try to get me the best returns while respecting my current needs.

Sally Muir

A client since 2011

We would be very happy to recommend the support and service we receive.

Valerie Locks

A client since 2010

I have always been completely useless regarding finance - thankfully our financial adviser is not! I've retired with far more than I ever expected and investments continue to grow safely. So - thank you!

Bernadette Jane Warner

A client since 2000

Very happy with the professional service I have received and feel a lot happier now with my finances put in order.

Martin Field

A client since 2011

Julie Cooper was recommended to me by a work colleague. She has been very helpful, professional and has explained everything well. I would definitely recommend her services to anyone else who are interested in a financial review.

Steven Rooke

A client since 2018

…Service has been first class.

Hugh Fells

A client since 2012

My face to face meetings with Rob Young and Jessica Lyons have always been very open and understandable. My questions have been answered clearly and I have left feeling that my financial matters are in good hands.

Sandra Jack

A client since 2000

[A] safe pair of hands in a complex financial world.

Gary Middlehurst

A client since 2003

A reliable company with good communication skills and good knowledge of the financial markets.

Alan Evetts

A client since 2014

Maureen Pembridge is a long-time trusted advisor to our family. The market might fluctuate but her attention to detail is consistent.

Linda Burnard

A client since 2000

I am pleased to recommend Julie as a trustworthy financial advisor. She explains financial jargon in plain language, and always listens carefully to my particular financial needs and has helped me make the best of my savings.

Carolann Samuels

A client since 2010

I have always been satisfied with the way that Black Swan has handled my account. And I have always found the staff very helpful whenever I need to call the office.

Robert Anthony Matthews

A client since 2012

An excellent personal service from a person I know and trust.

Michael Dalton

A client since 2010

I am getting a very good services from Black Swan, they have got my investments sorted out which was in a bit of a mess.

Roy Jakens

A client since 2012

A good, efficient team providing clear ideas to shape a winning strategy.

Adrian Michael Levenstein

A client since 2011

Black Swan is a company to be trusted, with friendly staff and professional advisors.

David Brian Jennings

A client since 2017

I have been with Black Swan for many years. I have never wished to change anything. They give a good straight forward service.

Martin Barrett Brooks

A client since 2010

Andy Peters has been invaluable in firstly combining several pension pots and then giving excellent investment advice. It has given us a great deal of comfort to know that our financial affairs are in such good hands.

James Guillum Scott

A client since 2014

I find my financial advisor easy to talk to and feel that she understands my lifestyle. She is always available for help when I need her and explains in words that I can understand.

Margaret Ena Glasgow

A client since 2000

Andy is a first rate Director, excellent communicator and leader.

Ross Perry

A client since

Black Swan Financial Planning and Andrew in particular, are very clever at working out how risk averse we are, and coming up with solutions that we feel comfortable with. We are happy in the knowledge that we can continue to enjoy a comfortable retirement. Andrew Peters is a very, very friendly person who is great to chat to and easy to deal with. He explains things very clearly in layman’s terms, and if we still don’t understand, he explains it until we do!

Alan & Jane Dyer

Clients since 2012

We have always found Rob [Young] to be very approachable and knowledgeable. We have every confidence in the advice given and feel comfortable with the decisions we’ve made. There are certain opportunities that we wouldn’t have known about if Rob hadn’t brought them to light, which makes the advice good value for money as far as we’re concerned.

Peter & Pauline O’Halloran

Clients since 2013

Rob [Young] is extremely knowledgeable. I knew nothing about the different types of trusts which will not only secure my income in retirement, but also leave a legacy for my children. I’m glad that I sought his advice when I did.

Sarah Wilson

A client since 2015

I am extremely happy with the service afforded to me by the company and my adviser Julie Cooper.

Geoff Coxell

A client since 2010

My wife and myself have been dealing with Black Swan for a number of years. We have met with different representatives from the company over the years and have found all very helpful in their own way. We met with James [Anderson] a few years ago and found him very helpful and knowledgeable. He keeps in contact with us on a regular basis. We find the Company information very helpful and we feel very secure with our finances.

Andrew Kirchen

A client since 2015

I have always found my adviser to be easy to contact, very professional in his approach, yet friendly and understanding. I have a sense of an experienced company behind him, really on the ball financially and with good standards.

B McBean

A client since 2011

Partner with the most reliable and experienced team of advisers

Enter your details & we'll be in touch to discuss your needs.
Alternatively, contact us directly and speak to a member of the team.

    Subscribe to our newsletter