The collapse of Silicon Valley Bank is downplayed by investors

Australian investors say the dramatic collapse of Silicon Valley Bank is unlikely to trigger systemic problems for global banking markets, but its failure will shake stock market confidence.

Local bank watchers also highlighted fundamental differences between the SVB and the Australian banking industry, arguing that the combination of forces that brought down the US lender was very specific.

Authorities shut down Silicon Valley Bank late last week.

Authorities shut down Silicon Valley Bank late last week.Credit:AP

The SVB, which mostly served tech companies, collapsed over the weekend in the second largest US bank failure in US history. The final trigger for the sudden failure was a rush as customers tried to withdraw billions of dollars in deposits, prompting the US government to step in over the weekend and seize control of the lender.

On Monday morning, equity markets’ fears over the broader impact of the bank failure appeared to have eased significantly after the US government said no depositors would lose money. In early trading, the ASX was 0.5 percent lower.

Meanwhile, banking experts and fund managers highlighted specific characteristics of SVB, notably its narrow focus on US tech companies as clients; its large exposure to bonds; and differences in US and Australian banking regulations.

Andrew Martin, director of fund manager Alphinity, pointed to SVB’s concentrated client base in the technology sector and the fact that an unusually large proportion of its assets are in bonds rather than bank loans. As squeezed tech companies began withdrawing funds, SVB was forced to sell a $21 billion bond portfolio last week at a $1.8 billion loss.

Martin said this was a “very specific circumstance” applicable to SVB. “It’s incredibly hard to spot — unless it’s causing less confidence in the system and people start switching to other banks — like it’s a systemic problem in its own right,” Martin said.

Tribeca Investment Partners portfolio manager Jun Bei Liu also said she doesn’t think the collapse portends major problems in the world banking system, although she said the magnitude of the collapse was “scary” and it spooked the market late last week.

“I think the contagion effect is very, very limited. It seems the problems are very company-specific,” Liu said. The collapse of Silicon Valley Bank is downplayed by investors

Brian Lowry

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