SVB crisis: How the ripples of the bank's plunge reached foreign shores

Silicon Valley Bank crisis: How has the bank's failure affected other banks and their stocks worldwide? Read more to find out

The collapse of the Silicon Valley Bank (SVB) last week has sent shockwaves across the globe. The Federal Reserve has acted swiftly, but the fears of contagion have remained high in the banking sector. The impact is clearly visible in the stock markets. 

USA

The fallout of the SVB was followed by the failure of Signature Bank on Sunday.

Following it on Monday, major US banks lost nearly $90 billion in stock market value, bringing their loss over the past three trading sessions to nearly $190 billion. Regional US banks were hit the hardest. Shares of First Republic Bank tumbled more than 60 per cent as news of fresh financing failed to reassure investors, and rating agency Moody's reviewed it for a downgrade.

Moody's has also placed six banks, namely Western Alliance Bancorp, Intrust Financial Corp, UMB Financial Corp, Zions Bancorp and Comerica Inc, on review.

The slide took place even when Joe Biden said his administration's actions meant "Americans can have confidence that the banking system is safe," while promising stiffer regulation after the biggest US bank failure since the 2008 financial crisis.

Overnight the VIX volatility index, nicknamed Wall Street's "fear gauge", shot higher, and other indicators of market stress showed early signs of strain. The S&P banking index fell 7 per cent, its largest one-day drop since June 2020.

The sentiments were also lower ahead of the inflation data that will be released by the US on Tuesday.

Europe

The markets in Europe also closed in the red following the SVB fallout. The stocks of major banks saw a wider selloff. Europe's STOXX banking index closed 5.7 per cent lower. Germany's Commerzbank fell 12.7 per cent, Spain's Santander fell over 10 per cent, and Credit Suisse slid 9.6 per cent to a record low.

Also, HSBC announced that it would acquire the UK subsidiary of SVB for 1 pound.

"This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC Deposits will be protected, with no taxpayer support. I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise," tweeted UK chancellor Jeremy Hunt.

Asia

On Tuesday, Asia's share markets also slid, with financial stocks in Tokyo leading the losses.

Japan's Nikkei dropped 2.2 per cent. The Tokyo Stock Exchange banks index fell more than 7 per cent, setting it on course for its steepest drop in nearly six months. Bank shares in Singapore and Australia fell. Hong Kong shares in HSBC and Standard Chartered dropped more than 5 per cent.

India

Indian markets were also in the red. After a brief period of recovery, as of 1 PM, Sensex was down over 300 points, and Nifty50 was down over 100 points. The Nifty Bank index was down 277 points. It was trading at 39,287.

Reports have suggested that the SVB fallout is unlikely to significantly impact the Indian banks because of their tight regulations.

Indian banks' large reliance on local deposits cushions them as global peers are facing potential contagion from the woes emanating from Silicon Valley Bank, according to Macquarie Group Ltd.

Amid all the "gloom and doom" in global banks, Indian lenders are distinguished with "hardly any exposure directly or indirectly to SVB," Macquarie analyst Suresh Ganapathy wrote in emailed comments on Monday, as reported by Bloomberg.

The sector has "a domestic deposit funded system with investments in Indian government securities," he wrote.

(With agency inputs)