Quick takes: The impact of SVB’s collapse on Singapore banks

SVB became the largest US bank to fail since the 2008 global financial crisis (GFC), with a rout in the lender’s stock that began last Thursday (March 9), spreading over into other US and European banks.

Less than 48 hours after the bank announced that it was planning to conduct a capital raise, the bank experienced a wave of withdrawals that sent its stock spiralling down. SVB was shut down by the California Department of Protection and Innovation on Friday, with the Federal Deposit Insurance Corporation appointed as receiver.

Economists from Citi Global Wealth Investments view the failure of SVB as a magnet for greater scrutiny to small- and medium-sized banks, with the potential for capital weakness. It however poses minimal risk for large banks, they said.

“While we do not view Silicon Valley Bank’s failure as a systemic event, its untimely failure is indicative of the unique set of stresses embedded in financial markets at this time. Its rushed closure and unique place within the tech ecosystem will have implications for markets and investor behaviour, in our view,” Citi said in a report on Sunday.

Singapore-based Lumen Capital Investors views SVB’s collapse as a result of higher-for-longer yields on the book of Treasuries held by the US Federal Reserve, as well as the impact of mortgage-backed securities held by banks as assets.

Highlighting the large number of US banks’ unrealised losses on available-for-sale and held-to-maturity securities as at end-2022, the multifamily office and asset manager believes more quantitative tightening will drain more liquidity out of banking systems globally. This will result in more banking stress in the next few months to come, said Lumen Capital.

Singapore’s trio of local lenders took a hit in early trade on Monday.