The collapse of a US bank hits the stock markets

Chalmers said the regulators’ first advice is that “any impact on the broader Australian financial system is unlikely to be significant”.

“Australians should be reassured that our institutions are sound, our banking sector is well capitalized and we are in a better position than most other nations to meet the challenges we face in the global economy,” he said.

“This is not a Lehman moment, this is not a globally significant bank.”

Hugh Dive, Chief Investment Officer at Atlas Funds Management in Sydney

Shares in the Commonwealth Bank of Australia fell 3.2 percent on Friday, National Australia Bank fell 3 percent, while Westpac and ANZ each fell 2.6 percent.

However, Hugh Dive, chief investment officer at Atlas Funds Management in Sydney, said Friday’s market reaction appeared significantly overdone, stressing that the fallout from the collapse was unrelated to the collapse of Lehman Brothers at the start of the 2008 global financial crisis.

“This is not a Lehman moment, this is not a globally significant bank,” Dive said. “It’s a relatively small bank and had a relatively narrow focus… most Australian investors had not heard of it as of Friday morning.”

Australian banks on Sunday considered whether they had indirect financial exposure to Silicon Valley Bank before deciding whether to notify the stock exchange.

Commonwealth Bank, ANZ, Westpac and NAB all declined to comment.

Dive said he would be shocked if a major Australian bank faced the collapse to any significant degree as they are well diversified and have largely withdrawn from many of their more exotic offshore activities.

He said the U.S. bank’s woes are a symptom of the woes of the tech industry, which has been experiencing a period of zero interest rates and investors are “willing to throw money at them.”

“In an environment where interest rates are rising, these companies face significant debt costs that put them under severe pressure,” he said.

Damien Boey, Barrenjoey’s chief macro strategist, said Silicon Valley Bank’s liquidity woes are “the awakening of market bears” — not because the bank is globally significant, but because investors have been alert to where tightening policy is affecting the economy would meet.

Boey said Barrenjoey is concerned there may be “other canaries in the coal mine” in the US commercial real estate sector.

“It appears that last year’s tech sell-off in response to the Fed’s tightening is now having an impact on the bottom,” he said. “We also don’t think things will end at Silicon Valley Bank as US commercial real estate is struggling with the availability of funding from commercial mortgage-backed securities markets and banks.” The collapse of a US bank hits the stock markets

Brian Lowry

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