Philippine banks not affected by SVB demise’

MANILA, Philippines — The biggest bank failure in the US since the 2008 global financial crisis has no substantial or material impact on the Philippine banking sector, according to the Bangko Sentral ng Pilipinas (BSP) and the Bankers Association of the Philippines (BAP).

The BAP assured the Filipino public about the continued strength and stability of the country’s banking system amid the collapse of Silicon Valley Bank (SVB) in the US.

“Banks have diversified deposit bases that include all sectors of the Philippine economy, allowing them to continuously provide the liquidity needs of their clients. Additionally, banks in the Philippines continue to have capital and liquidity ratios that exceed the requirements set by the BSP,” the BAP said in a statement.

According to the BAP, the prudential measures implemented by the BSP continue to provide the necessary support that allows the Philippine banking system to withstand economic shocks.

“The BAP continues to work with the BSP and other stakeholders to pursue reforms that will lead to an even stronger financial system that sufficiently provides the financial needs of the banking public,” it said.

BSP Governor Felipe Medalla said Philippine banks have “no reported exposure” to the collapsed US bank.

Medalla added that “banks’ FCDU assets are mostly loans, Republic of the Philippines dollar bonds, and sovereign bonds of countries with high credit ratings.”

The fallout of startup-focused lender SVB Financial Group has sent shockwaves through the global financial system, raising concerns that rising interest rates could expose vulnerabilities in the global economy.

The 16th largest commercial bank in the US established in 1983 collapsed, following a frenetic 48 hours bank run wherein customers yanked out their deposits from the lender.

Like many other banks, SVB ploughed billions into US government bonds during the era of near-zero interest rates. However, the US Federal Reserve aggressively hiked interest rates to tame inflation.

Just two days after the closure of SVB, US regulators also ordered the shutdown of Signature Bank.

For his part, Moody’s Investors Service vice president and senior credit officer Eugene Tarzimanov said the impact of the bank failures in the US would be limited for most rated financial institutions in Asia-Pacific because of structural factors.

Tarzimanov explained that most institutions in Asia-Pacific are not exposed to the failed US banks, and only a handful of institutions have immaterial exposures.

“Finally, most institutions are not as susceptible to large losses from debt security holdings as SVB was. The second order impact of the US bank failures is still developing and bear close watching,” Tarzimanov said.

According to the debt watcher, rated banks in the region structurally have stable funding and ample liquidity.

“They are mostly funded with customer deposits, while their market borrowings are modest at about 16 percent of their total assets on average. Their business depositors are well diversified across different sectors, with no rated bank in the region being heavily exposed to technology companies,” Moody’s said.

Also, the credit rating agency said banks’ deposits in the region are generally not heavily concentrated on single clients.

It added that most banks in the region are subject to liquidity coverage ratio (LCR) requirements that are aimed at ensuring banks hold ample high-quality liquid assets to get through stressed funding conditions, such as deposit runs.

Meanwhile, Shares of Philipine banks took a beating yesterday as jitters over the collapse of US bank Silicon Valley Bank (SVB) spread to the local stock market.

Shares of Philippine banks were not spared with the country’s top bank, Sy-led BDO spiraling downward to P118.30 per share, down by 3.03 percent from P124 per share last week.

BPI’s shares likewise tumbled by 1.24 percent to close at P103.80 per share from hitting P109 just last week.

Shares of Lucio Tan-owned Philippine National Bank lost 2.05 percent to close at P19.12 per share while Metrobank shares also declined to P57.50 per share, down by 3.20 percent.

Rizal Commercial Banking Corp. closed at P24.05 per share, down by 1.84 percent. Security Bank, meanwhile, lost 1.17 percent to finish at P93 per share.

Despite initial panic on Wall Street, analysts said SVB’s collapse is unlikely to set off the kind of domino effect that gripped the banking industry during the financial crisis.

The system is as well-capitalized and liquid as it has ever been,” Moody’s chief economist Mark Zandi said, as quoted by CNN.