‘Any smell of risk is quite dangerous’: ANZ boss

Elliott said he did not think the recent market turmoil sparked by the collapse of SVB was akin to the collapse of Lehman Brothers in 2008, saying Silicon Valley Bank was a “moderately large US bank”. But he said the financial community, including bankers, investors, analysts, regulators and governments, were asking themselves if the tremors were a sign of more to come.

“Silicon Valley Bank in and of itself, you wouldn’t describe as the big one, but it’s an early tremor and the question is, everybody’s sitting there going, is this an early warning sign? Is there more to come?”

Loading

This week’s dramas in US and European banking have weighed down the share prices of Australia’s biggest banks, though analysts have emphasised that SVB’s problems were company-specific. Australian lenders are also subject to much tighter regulation and supervision.

Morgan Stanley analyst Richard Wiles said in a note to clients the direct risk to Australian banks from the collapse of SVB was “modest”, highlighting regulatory changes that have made the lenders more shock-proof over the last 15 years.

Wiles highlighted a metric known as the liquidity coverage ratio, which requires banks to hold enough liquid assets to cover a 30-day run on deposits. He said calculations for the ratio assumed about $500 billion of deposit outflows.

Loading

“We believe that APRA and the major Australian banks learned the lessons of the 2008 global financial crisis and have significantly strengthened their liquidity, funding and capital,” Wiles said.

Even so, Wiles said recent events in the US banking sector could drive up the cost of wholesale funding for Australian banks, which could intensify the competition for local lenders to attract stable deposits.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.