Bundesbank convenes crisis team to assess SVB fallout

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SVB (Silicon Valley Bank) logo and EU flag are seen in this illustration taken March 12, 2023. REUTERS/Dado Ruvic/Illustration

 

FRANKFURT (Reuters) – The Bundesbank convened its crisis team on Monday to assess the possible fallout of the collapse of U.S. lender Silicon Valley Bank on the local market, even as no emergency action was foreseen in Europe.

U.S. authorities launched emergency measures on Sunday to shore up confidence in the banking system after the failure of Silicon Valley Bank threatened to trigger a broader financial crisis.

With euro zone banking shares falling sharply early on Monday — Commerzbank (ETR:CBKG) fell as much as 11% while Deutsche Bank (ETR:DBKGn) was down 6.5% — the German central bank called a meeting of its Financial Crisis Team to assess the ramifications for local lenders and financial markets, a spokesman told Reuters.

Created at the time of the last financial crisis in 2008, the team is tasked with informing the Bundesbank’s board and making recommendations but it doesn’t have the power to take decisions.

In the euro zone decisions are made by national supervisors for smaller banks and by the European Central Bank’s Single Supervisory Board for large ones.

A senior European supervisor source told Reuters on Monday that the Single Supervisory Board had not held any emergency meeting and was not planning to hold one, with its next scheduled gathering due to take place on March 23-24.

No communication from that board or from the ECB’s Governing Council, which is responsible for monetary policy, was expected.

A spokesman for the ECB declined to comment while a spokesman for the Banque de France said it didn’t have a crisis meeting in the works.

The source added euro zone banks were generally well funded had done a good job of transferring assets from their trading books to their “hold-to-maturity” portfolio, meaning they didn’t have to account for lower market prices as a result of rising interest rates.

He also noted euro zone banks generally had a more conservative mix of assets than Silicon Valley Bank, which mostly lent to risky tech startups.

The source saw no direct implication of the SVB collapse for euro zone banks but cautioned this could change if the fallout in the United States extended to bigger banks, raising the risk of contagion.

Germany’s financial regulator BaFin, which supervises German banks in cooperation with the Bundesbank, said it was imposing a moratorium on the German branch of SVB in the wake of its demise.

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