Bank of England on heightened alert for further banking risks

The Bank of England is on "heightened" alert for further turmoil in the banking sector, its governor has said.

However, Andrew Bailey told MPs the recent problems facing lenders had not caused stress in the UK banking system.

Officials have tried to calm investors since Silicon Valley Bank and Signature Bank failed, sparking concerns about the stability of other lenders.

In Europe, worries over the strength of Swiss banking giant Credit Suisse led to a rushed takeover by rival UBS.

Nerves among investors have sparked sharp falls in banking shares around the world.

Mr Bailey told MPs on the Treasury Committee that the Bank of England would "go on being vigilant".

He said we were in a period of "very heightened, frankly, tension and alertness".

The collapse of Silicon Valley Bank was the biggest US banking failure since the 2008 financial crisis, and left depositors struggling to get their money out.

Regulators had to step in to protect customers, while the lender's UK arm was rescued by HSBC.

Banking officials admitted to MPs that the speed of the SVB's collapse had taken them by surprise and may mean that banking rules may need updating.

Mr Bailey said it was "the fastest collapse from health to death" since the UK's Barings Bank failed in 1995 after suffering heavy losses resulting from fraudulent investments. Sam Woods, the chief executive of the Prudential Regulation Authority, noted that SVB UK saw about a third of its deposits - £3bn - withdrawn in one day.

He twice suggested to the MPs that the stress tests applied to UK banks to make sure they can withstand a crisis would need to be looked at, given how new technology meant deposits could be withdrawn electronically in seconds. However, Mr Bailey told MPs he did not think the UK was in a position similar to the 2008 global financial crisis, when banks stopped lending to each other, plunging the world into a deep recession.