SVB impact affects bourse

Economists stress that the negative impact of collapsed California-based Silicon Valley Bank has been felt only in the local stock market and will be temporary, as Philippine banks remain well-capitalized with diversified loan businesses and investments.

“We are currently seeing negative investor sentiments weighing on local bank stocks. However, we do not expect the collapse of SVB to have a significant spillover effect on the domestic banking sector,” China Banking Corporation chief economist Domini Velasquez told Daily Tribune on Wednesday.

SVB became the biggest bank to fail on Friday since the financial crisis of 2008.

Regulators also abruptly closed down Signature Bank last Sunday to stop a crisis in the larger financial system.

While these developments triggered stocks to drop in both local and foreign markets, economists here expect this to end soon.

Knee-jerk reaction

“We think that the entry of the PSEi in the 6300-level is temporary and would be largely described as a knee-jerk reaction. It is very natural for investors to immediately react to something of the magnitude of recent events like the demise of SVB and Signature Bank,” Union Bank of the Philippines chief economist Carlo Asuncion said Wednesday.

According to a Bloomberg report, the 40-year-old SVB helped fund 50 percent of tech startups in the United States and 44 percent of newly publicly-listed startups in technology and healthcare last year.

However, with the diversified loan businesses and investments of Philippine banks, economists say a collapse akin to SVB’s is highly impossible to happen to Philippine banks.

“Unlike SVB which mainly catered to tech startups, large local banks mostly have diversified loan portfolios, mitigating credit concentration risk,” Velasquez said.

Spared from negative impact Maybank Philippines researcher Rachelleen Rodriguez added that local banks have no business deals with SVB, sparing them from any negative impact from the fate of the foreign bank.

“We think the sell-off following the collapse of Silicon Valley Bank was overdone considering Philippine banks’ strong capital positions, reinforced credit policies, high

non-performing loan buffers and predominantly local government investment exposures,” she said.

The Bankers Association of the Philippines said last Tuesday that “the Philippines continue to have capital and liquidity ratios that exceed requirements set by the Bangko Sentral ng Pilipinas.”

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