SVB bankruptcy does not affect German financial stability, says regulator

SVB Crisis

The German financial regulator BaFin (Federal Financial Supervisory Authority) affirmed this Monday (13.03.2023) that the collapse of the Silicon Valley Bank (SVB) in the United States does not pose a financial threat to Germany, amid growing fears of an effect contagion. Officials in France and Japan have also downplayed the risk of damage to their economies.

“The critical situation of the German subsidiary of Silicon Valley Bank does not constitute a threat to financial stability,” BaFin said in a statement, explaining that the entity “has no systemic relevance,” BaFin ordered the freezing of the activities of the German branch, whose headquarters are in the city of Frankfurt. The total assets of the branch amounted to just under 790 million euros at the end of 2022.

A similar position was expressed by the Minister of Economy of France, Bruno Le Maire, who said that bankruptcy does not affect French banks. “I do not see a risk of contagion, so there is no type of alert,” Le Maire told France Info. The official assured that the French banking system is “solid”, has a “high” liquidity ratio and a “highly diversified sector of activity”.

Japan watches, London buys

Le Maire, who stressed that “an extremely rigorous control system” operates in France, maintained that the collapse of SVB “is something very specific” that has affected “a bank specialized in the technology sector”. The shock wave of the collapse of the US bank affected the price of banks in France, as it did throughout Europe.

The Government of Japan, meanwhile, said that it is monitoring the evolution of the bankruptcy of SVB and Signature Bank. “The Japanese government will be attentive to the evolution of the economy and financial markets inside and outside Japan, and the influence” of these bankruptcies, said a spokesman.

Meanwhile, the British branch of the SVB was sold to HSBC, a sale “facilitated” by the British government and the Bank of England, the British Treasury announced. To avoid further problems, US financial regulators have assured that they will take appropriate measures to ensure the protection of all insured deposits and customer refunds.