The collapse of Silicon Valley Bank, amid massive losses on its bond investments due to rising US interest rates and a resulting fire sale, is a reminder of the risks associated with central banks raising interest rates aggressively, according to Alice Haine, personal finance analyst at Bestinvest. She believes the bank failure could increase pressure on central banks to hold back on interest rate hikes. Haine said HSBC’s takeover of the UK arm of the failed bank was significant for the market’s recovery. Following a decade of ultra-low interest rates, turning to a new era of rapidly increasing rates was always likely to bring repercussions. While there has been a slump in UK bank stocks on the back of the bank’s failure, Alice Guy, head of pensions and savings at Interactive Investor said it was due to general market nervousness rather than any specific danger to UK banks. The events would put added pressure on the UK and US central banks to ease up on raising interest rates at their next meeting, Guy added.
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