ANZ boss Shayne Elliott says any risky smell is pretty dangerous

Elliott said he doesn’t think the recent market turmoil sparked by SVB’s collapse is comparable to Lehman Brothers’ collapse in 2008, and said Silicon Valley Bank is a “mid-size US bank.” But he said the financial community, including bankers, investors, analysts, regulators and governments, was wondering if the tremors were a sign more was to come.

“The Silicon Valley bank per se wouldn’t be called the big one, but it’s an early tremor and the question is, everyone sits and walks, is that an early warning sign? Is there more to come?”

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This week’s drama in the US and European banking sectors has weighed on the share prices of Australia’s largest banks, although analysts have stressed that SVB’s problems are company-specific. Australian lenders are also subject to much stricter regulation and oversight.

Richard Wiles, an analyst at Morgan Stanley, said in a note to clients that the direct risk to Australian banks from the SVB’s collapse was “small”, highlighting regulatory changes that have made lenders more resilient over the past 15 years.

Wiles highlighted a metric known as the liquidity coverage ratio, which requires banks to hold enough liquid assets to cover a 30-day rush for deposits. He said calculations for the ratio assumed deposit outflows of about $500 billion.

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“We believe that APRA and Australia’s major banks have learned the lessons of the 2008 global financial crisis and significantly strengthened their liquidity, funding and capital,” said Wiles.

Still, Wiles said, recent events in the US banking sector could push up the cost of bulk funding for Australian banks, which could intensify competition for local lenders for stable deposits.

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