Due to the Silicon Valley Bank incident, market capitalization of Global Financial Stocks declines by $465bln
Global financial stocks have suffered a massive blow with over $465 billion lost in just three days following the fall of Silicon Valley Bank (SVB).
US banking stocks dropped again in yesterday's trading session, further spreading the decline in banking stocks worldwide. Investors continue to express doubts over the efficacy of the rescue plan from the US Government in preventing more fallout from the SVB crisis.
In a statement issued on March 13, US Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg pledged to ensure insurance coverage for all customer deposits at SVB and Signature Bank.
Despite reassurances, investors are fearful of further bank collapses, resulting in the selloffs of global bank stocks. Most major US banks lost around $90 billion in market value on Tuesday, and their capitalization losses over the last three trading sessions sum up to almost $190 billion. US regional banks took the biggest hit, with shares of First Republic Bank falling by more than 60%.
Asian banks are less exposed to the direct risk from the SVB incident since the majority of the big banks in North Asia have solid deposits, liquidity, and asset mix. Still, smaller banks have the potential to carry liquidity and credit risks that are often overlooked. Although there are concerns that Asia's banks may feel the impact of risk from their investments in bonds and other financial instruments during this period of turbulent market sentiment due to SVB's fall.
Bloomberg Intelligence analyst Francis Chan speculates that Japanese financial stocks have fallen sharply due to the potential risk of a hard landing in the US economy and the probability of the Fed turning around on interest rate policy. If this does not occur, today's performance in Japanese financial stocks will likely be an overreaction, according to Michael Makdad, an analyst at Morningstar.
Paul Ashworth, chief North American economist at Capital Economics, stated that even if some midsize banks in the US fail, this will not develop into a full-blown systemic crisis that could cause a credit crisis.
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Due to the Silicon Valley Bank incident, market capitalization of Global Financial Stocks declines by $465bln
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