Official media say a similar collapse in China is unlikely, but the situation has “important implications” for lenders.
The collapse of the Silicon Valley Bank (SVB) will not affect China’s financial system, but offers an important lesson for the country’s banking sector, according to the official Securities Times.
An SVB-style bank failure is unlikely to happen in China, but the incident would have “significant implications for the development of China’s small and medium-sized lenders and the stability of China’s financial system,” the media said in an editorial. comment on Wednesday.
The closing of the SVB on Friday has shaken global markets, forced US President Joe Biden to rush to ensure the financial system is safe and led to US emergency measures allowing banks to access more funding.
In China, shares of smaller lenders, including Bank of Lanzhou, Xi An Bank and Xiamen Bank, have underperformed major banks over the past week on concerns about their ability to manage risk.
China’s smaller banks, which are more vulnerable to interest rate risk, could suffer from shrinking interest rate spreads and investment losses during a cycle of rate hikes, GF Securities said in a report this week.
The Securities Times said that while the SVB incident is a reflection of looser regulation of such banks in the United States, a slew of financial regulatory reforms in China in recent years have cleaned up the industry, curbed shadow banking and boosted the financial reduced risks.
In addition, China has closed regulatory loopholes, the editorial said. In the latest move, China said last week it would set up a new national financial regulatory body to consolidate oversight of the sector.
“While the SVB incident will have no material impact on China’s financial markets, China’s financial industry should seriously learn from this lesson and always prioritize risk prevention and control,” the paper said.
SVB’s Chinese joint venture has also tried to allay fears among customers and investors, saying on Saturday that it has a solid corporate structure and an independently managed balance sheet.