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Silicon Valley Bank logo in Frankfurt on March 13, 2023.
Brussels – The European Commission is monitoring the situation after the collapse of the American Silicon Valley Bank (SVB). However, the bank was only present in the EU to a very limited extent. This was stated today by the spokesperson of the European Commission. Authorities in Switzerland and Norway are also monitoring the situation. Norway's sovereign wealth fund told Reuters it had invested in SVB and hoped to get some of the investment back. Friday's collapse of SVB was the largest bankruptcy of a US bank since the 2008 financial crisis.
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“We note the quick and decisive reaction of the US authorities. At the EU level, Silicon Valley Bank's presence is very limited and we are in contact with the relevant authorities,” said an EC spokesman.
Norway's sovereign wealth fund told Reuters it had NOK 1.699 billion (CZK 3.5 billion) in SVB shares and NOK 1.103 billion in bonds. The fund expects to be able to get some money back from the credit exposure, but it is too early to say how much. Norway's banking regulator FSA added that there is no indication yet that Norwegian financial market players have significant exposure to US banks affected by the crisis.
Swiss financial regulator FINMA says it is monitoring the situation around the bankrupt SVB and looking for signs contagion from the collapse of the bank to identify possible group risks in time.
The Swedish Financial Supervisory Authority FI said today that the collapse of SVB is unlikely to affect Sweden's financial stability. FI is in close contact with Sweden's largest banks, and none of them are estimated to have any major direct exposure of their own to troubled US banks.
In response to Friday's collapse of SVB, the authorities also decided to close New York's Signature Bank. According to the regulatory authorities, keeping the bank in operation could threaten the stability of the entire financial system.
ČNB: There are no banks operating in the Czech Republic with a similar model to those that have failed in the USA
There are no banks operating in the Czech banking sector with a business model similar to that of the American Silicon Valley Bank (SVB) and Signature Bank, which ran into problems. Czech National Bank (ČNB) Vice-Governor Eva Zamrazilová stated this today when asked by ČTK. According to her, Czech banks are well equipped with capital. Friday's collapse of SVB was the biggest fall of an American bank since 2008, subsequently the authorities also closed Signature Bank.
“The Czech National Bank is closely monitoring the situation in the USA, where two medium-sized banks failed,” said Zamrazilová. “In the Czech banking sector, banks do not operate with a business model similar to banks that ran into problems in the USA. Domestic banks are well capitalized and are obliged to comply with strict regulatory rules, including those for liquidity management,” she added.
SVB specialized in technology companies backed by venture capital. Signature Bank had eight national business areas, including commercial real estate and digital banking. Almost a quarter of its deposits were from the cryptocurrency sector.
“The failed banks were specific in many respects. In general, we can say that they were hit by high interest rates. Due to the rapid growth of deposits, they bet on buying bonds, the prices of which, however, fell with the increase in interest rates. Deposits in standard banks have grown several times more slowly in recent years, which limits the possibilities of their losses. In addition, the failed banks concentrated on crypto business, moreover, in young companies – that is, only in a small corner of the banking market,” said XTB analyst Jiří Tyleček.
Analysts agree that the collapse of the two banks does not mean the beginning of a new financial crisis. “Although this is the biggest crash since 2008, today's situation is different from the financial crisis of that year. The world economy is incomparably better off. SVB did not play as significant a role in the system as Lehman Brothers did before its collapse in 2008. So it should not there will be no domino effect,” said Port analyst Marek Malina.
“Another reason to ease concerns is the fact that the financial sector remains healthy, as evidenced by the very good financial results of leading banks and the quality of loan portfolios. Share of non-performing loans in American banks is only 1.19 percent, which is the lowest level in the monitored history since 1985,” added Malina. Before the collapse of Lehman Brothers, this share was 3.72 percent.
According to Cyrrus analyst Tomáš Pfeiler, however, the collapse of both banks may trigger a correction in the stock markets. “It is true that shares are roughly 15 percent more expensive than their fair value. At the moment when valuations are inflated, even a seemingly insignificant event can trigger a significant market decline. However, I expect a more short-term effect,” he said.
