Assessing the impact on Asia of the SVB and Signature Banks collapses

Written by Kapronasia || March 22 2023

Asia has been fortunate thus far in that the failures of Silicon Valley Bank (SVB) and Signature Bank have not had a significant impact on its financial sector. While some financial firms in the region had limited exposure to these defunct lenders, it was not enough to pose a serious problem. Indeed, S&P Global Ratings has found that of the 380 banks and nonbank financial institutions that it rates in the region, it does not anticipate any rating actions directly related to the SVB default.

In general, Asia-Pacific banks have held up well over the past two decades, whether in terms of liquidity or funding. This trend has been consistent through some major financial upheavals – both the global financial crisis of 2008-2009 and the European sovereign debt crisis. As regulators have pushed for banks to shore up their balance sheets, Asia-Pacific lenders have tended to err on the side of caution.

S&P Global has found that even if contagion risks tied to the SVB default turn out to be worse than expected, banks throughout the APAC region can weather it well. New Zealand is the only banking jurisdiction of the 18 covered by S&P Global in which risks trends are negative. In the other 17, they are stable.

Some financial officials in Asian countries have spoken out recently to assuage concerns about their respective banking sectors. Japan's banking sector will not face incidents similar to SVB’s implosion given differences in the structure of bank deposits, Finance Minister Shunichi Suzuki said last week. Though Japanese banks have suffered losses on their foreign bond portfolios, they have been mostly offset by profits from stock holdings, he said, adding that Japanese regional lenders also face smaller risks of a bank run because their deposits consist mostly of small-sized ones for individuals, unlike the fast-moving, big deposits of SVB.

Since SVB’s collapse, Japan's largest banks by assets – Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group – fell in value between 10% and 12%, erasing 2.67 trillion yen (US$20.27 billion) in market capitalization.