Olivia Feldman, co-founder of the financial product comparator HelpMyCashhas shared with Cointelegraph en Español an already cold situational analysis of the fall of Silicon Valley Bank, the US bank that set off the alarms and put the entire US banking system to reel.
First of all, they point out from HelpMyCash that the fall of Silicon Valley Bank (SVB) has fueled the fear of a new crisis. During the last two weeks, this US bank, which until a few days ago was unknown to most, has made dozens of headlines and has unleashed panic in the markets, including in the shares of Spanish banks, which registered a drop two weeks ago with CaixaBank falling 5.5%, Banco Santander 6.4%, BBVA 8.1% and Sabadell 9.8%. All this, they say, despite the fact that Spanish banks do not have direct exposure to the Californian entity.
In this context, Nadia Calviño, Minister of Economy, assured in recent statements that the European banking system was sufficiently capable of facing the consequences that originated from the bankruptcy of the American bank Silicon Valley Bank (SVB).. In addition, the government official has also pointed out that the Spanish banking system “it has a healthy balance sheet situation”.
Having said that, the main question that citizens usually ask themselves is whether their savings are in dangerand in this sense, Feldman points out that no, as long as they do not all run to get the money from the bank.
The SVB problem
As explained by HelpMyCash, Silicon Valley Bank’s problem has not been its solvency, but a lack of liquidity caused by the loss of value of its investments and the withdrawal of money from its depositors, mainly technology startups. “The perfect Storm”they rated it.
Under this situation, they mentioned that the bank had to liquidate its fixed-income assets to meet the liquidity demands of its clients, assets whose value had fallen due to the rise in rates, which has caused its bankruptcy. “If interest rates rise, the debt securities lose value in the secondary market, which causes losses to be generated if the bank has to sell them to meet the liquidity demands of its customers”explained Olivia Feldman of HelpMyCash.
SVB turned out to be a bank that had a customer base with very specific characteristics and was very well located geographically, as it was a bank that served companies in the technology sector that, as a result of interest rate rises, have had to resort to their own funds to finance itself. “This indicates that the contagion effect does not seem to have a long run”Feldman said.
Is there danger in Spain?
According to the Spanish Institute of Analysts, the current uncertainty in the market is great, but it cannot be compared with the situation that arose with the bankruptcy of Lehman Brothers in 2008, since “the banking model followed by European banks is different from that of North American banks and they are not as involved in the business of technology companies”.
“The problem with bankruptcies is the contagion effect”they explain from HelpMyCash.
In other words, they clarify that there is no direct link between SVB and Spain and it does not seem that Spanish banks are going to follow the same path as SVB; however, they emphasize that the only connection is fear, and in moments of crisis, panic seizes savers, who seek to put their money to safety. Nobody wants to lose a penny of their capital, but panicthey say, is the “worst enemy” from the bank
“Let’s not forget that no matter how healthy a bank is, if all savers go to recover our money at the same time, there won’t be enough for everyone”Feldmann said.
“In any case, there are no reasons to think that what happened at SVB is going to unleash a global crisis and, in particular, is going to affect Spanish banks. After all, it is an entity with very specific characteristics that cannot be extrapolated to other banks”added Feldman, who also made mention of the declines in the shares of Spanish banks, pointing out that these values are usually corrected in moments of uncertainty.
Effects on the Euribor
As they mention, the SVB crisis has brought attention to the effect of rate hikes. Two weeks ago, the current situation triggered rumors of a change of course in the Fed’s monetary policy, and a moderation in European policy, which would affect the Euribor, since its price is closely related to the price of money set by the ECB.
Better safe than sorry
Finally, from HelpMyCash they also mention that these facts remind us of the importance of being cautious, and that It is not convenient to have all the eggs in the same basket, despite the fact that there are limits that should be respected, for example in the case of Spain: “The Deposit Guarantee Fund (FGD) protects the first 100,000 euros that each depositor has in each bank, so in the event of a hypothetical bankruptcy, savings of up to 100,000 euros per holder are guaranteed”they explained.
“But if that figure is exceeded, unnecessary risk is assumed, so it is recommended to diversify. Even if the figure is lower, it doesn’t hurt to divide it into several banks. If an entity goes bankrupt, the money may be withheld for a few days until the FGD reimburses it”, they added.
In any case, they concluded, the SVB crisis had a happy ending for savers when the United States Federal Reserve announced that all depositors of the entity would recover their savings.
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