The collapse of the American Silicon Valley Bank is causing great turmoil in the financial markets. On Wall Street, bank stocks in particular have been the big losers. Some stocks have even halted trading. There is fear, especially among medium-sized banks that are not subject to stricter supervision, says analyst and strategist Corné van Zeijl of asset manager Actiam.
Banks still lost 15 percent yesterday, Van Zeijl said. It was mostly the medium and small banks, there’s less fear for the bigger banks because they’re still under stricter supervision since 2008. “But they’re not doing very well either.” According to Van Zeijl, Silicon Valley Bank has taken on more risk than expected to finance customers.
Since 2018, banks with a balance sheet capital of less than 250 billion (and SVB had 206 billion) are subject to less stringent regulations to stimulate the economy. It worked and many startups benefited greatly from it, but this is the flip side: that banks take bad risks. “They mostly went into long-term bonds. And if interest rates go up, that’s where the blows are hardest.’
The US president has said he will do everything to protect the banking system, especially trust in it. The customers are thus bailed out, but the shareholders and bondholders simply lose their money. “I am the shaak. And rightly so, I think you too should help trust the system in this way. So the most important thing is that you don’t have any new bank runs.’
“The important thing is not to have new bank runs”
Van Zeijl thinks that the biggest pain has now been suffered by the banks, he sees that investors have plunged en masse into bonds. “You can see that interest rates on short-term and long-term bonds have really come down tremendously. And low interest rates are generally not good for banks.’ Which means the banks won’t recover that quickly either.
Exposure
While the Netherlands also has exposure to American banks, the situation here is fundamentally different from the United States, Europe does not have regulations as relaxed as those introduced by Donald Trump in 2018. “So the ECB looks at the composition of the balance sheet, it looks at the quality of the balance sheet. So, in that respect, we have a lot less to worry about here.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
