The fall of the SVB bank does not endanger French banks. FranceInfo guest, Bruno Le Maire wanted to be reassuring.
The failure of Silicon Valley Bank in the United States raised fears of other bank collapses around the world. But for Bruno Le Maire, the link is not so obvious: “The French banking system is solid,” he hammered home.
The domino effect is not the favored hypothesis. But the central question is that of the confidence of savers in the sector. However, “trust cannot be decreed”, underlines Nicolas Doze, editorial writer for BFM Business.
For industry experts, the disappearance in just two days of SVB should have limited consequences for the banking sector. With AFP, Stephen Innes, an analyst at SPI Asset Management, wants to be reassuring by considering “low”, in a note, the risk “of a capital or liquidity incident among the big banks”. “The balance sheet of these big banks is not at all the same” as that of SVB, Diane Neuville, an analyst at ODDO BHF, confirmed to BFM Business.
The problems facing the bank “are very specific” and are not likely to “affect the entire banking sector, let alone the big banks,” said Ken Leon, an analyst at CFRA.
In fact, since the financial crisis of 2008/2009 and the bankruptcy of the US bank Lehman Brothers, banks have had to give reinforced guarantees of soundness to their national and European regulators. For example, they must demonstrate a higher minimum level of capital set aside to absorb any losses.
“We are no longer in the world of 2008”
For Morgan Stanley analysts, “the funding pressures facing SVB are unique and should not be seen as the norm for other regional banks.” “I think we are in something quite isolated. And we must not forget what central banks have become, between the subprime crisis and today, the rather massive instruments of action that they have developed, their coordination… We are no longer in the world of 2008”, indicates in BFM Business Frédéric Farah, economist, teacher-researcher affiliated with the Phare laboratory of the Sorbonne.
US Treasury Secretary Janet Yellen said on Friday that the banking sector remains “resilient.” One of the White House economic advisers, Cecilia Rouse, highlighted for her part that the sector was “fundamentally different from what it was ten years ago.” However, for Morningstar’s Eric Compton, SVB’s setbacks are a reminder “that it can be very difficult to predict” how risks related to liquidity levels may evolve over the course of a quarter and “when they may materialise.”
The risk of rate hikes in banks
The loss caused by the sale of SBV financial securities has also highlighted the risk posed to banks by the rise in interest rates operated for a year by the US central bank in an attempt to fight inflation. On the one hand, the banks benefit because their interest income from the loans they grant increases. But it also increases borrowing rates and affects “demand for loans,” he adds.
Also, rising interest rates automatically reduce the value of bonds held by banks. The FDIC recently warned that its potential losses in this regard currently stand at $620 billion. But there is no a priori reason why large banks, which have “sufficiently large” deposits from “diversified sources,” should be forced to sell bonds at a loss before they mature, Ken Leon says.
Source: BFM TV
