NEW YORK, March 11 — The surprisingly rapid implosion of Silicon Valley Bank has markets jittery over a potential sign of widespread turmoil, but analysts see only a limited risk of financial contagion.
Treasury Secretary Janet Yellen described the US banking sector as “resilient,” while Cecilia Rouse, chair of the White House Council of Economic Advisers, also cited US reforms in arguing disaster would be averted. For Morningstar analyst Eric Compton, the suddenness of SVB’s demise highlights “that it can be very difficult to predict how funding pressure can change in any given quarter and when these risks can materialize,” he said in a note this week.
But the tech sector has been hard hit by the dramatic pivot in US monetary policy, with much higher borrowing rates leading to heavy deposit withdrawals.Confronted with the need to raise money quickly, SVB sold about US$21 billion in securities, resulting in a loss of US$1.8 billion. But that left many regional lenders still under pressure, including First Republic Bank, which slumped 15 per cent and Signature Bank, a cryptocurrency-exposed lender, which plunged 23 per cent.