SVB fall: Biden's assurance fails to calm jittery bourses

New Delhi, March 14

Stock markets on Tuesday sank to new lows despite assurances from new Silicon Valley Bank (SVB) chief Tim Mayopoulos who said the deposits are protected and also by Moody’s which said most Asia Pacific financial institutions are not exposed to the failed US banks and are therefore not as susceptible to large losses from debt security holdings as SVB was.

Stock rout deepens

• The collapse of the Silicon Valley Bank has sent shock waves across the tech and banking industries and the global bank stock rout has further deepened

“SVB resolution is reassuring. (It) will bring relief to startups,” said IT Minister Ashwini Vaishnaw, in a reference to US President Joe Biden’s attempt to usher calm and the UK government facilitating HSBC to buy the UK arm of SVB for 1 pound. But neither the global stock markets nor the Indian bourses were taking the assurances at face value. On Tuesday, Sensex went down 337 points to close below 58,000, at 57,900. Nifty lost 111 points to end at 17,043.

Shares in the US and European banks were declining and Government bond prices increased as investors opted for safe-haven assets. Regional American banks were in deep waters with California-based First Republic Bank losing over 60% in market value and Western Alliance Bancorp and PacWest Bancorp also declining heavily. The KBW banks index comprising major American banks fell by over 10% while in London shares of big banks fell, including those of Barclays and Standard Chartered.

The mood has also soured because Moody’s is planning to downgrade six US banks. These banks are First Republic Bank, Zions Bancorporation, Western Alliance Bancorp, Comerica Inc, UMB Financial Corp and Intrust Financial Corporation.

But Biden’s assurance followed by the takeover of SVB has helped soothe the nerves of startups which had their deposits locked in. Indian startups are now working to move their funds after the US regulator made accounts accessible. Banks are in talks with startups to expedite account opening at bank branches at International Financial Services Centre in Gujarat’s Gift City.