SVB Crisis: Financial Stocks Lose $465 Billion Worldwide

The declines came after US peers tumbled, with investors questioning whether a government rescue plan for the banking system will prevent more fallout from SVB’s collapse

Following the crisis in Silicon Valley Bank (SVB), financial stocks have tumbled worldwide. The SVB collapse routed $465 billion in market value so far as investors cut exposure to lenders from New York to Japan in the wake of Silicon Valley Bank’s collapse, according to a report by news agency Reuters.

Losses widened early on Tuesday with the MSCI Asia Pacific Financials Index declining as much as 2.7 per cent to the lowest since November 29. Mitsubishi UFJ Financial Group Inc slid as much as 8.3 per cent in Japan, while South Korea’s Hana Financial Group Inc fell 4.7 per cent, and Australia’s ANZ Group Holdings Ltd lost 2.8 per cent, according to the report.

The declines came after US peers tumbled, with investors questioning whether a government rescue plan for the banking system will prevent more fallout from SVB’s collapse. Asian lenders have been seen as more insulated from direct risk. The combined market capitalisation of the MSCI World Financials Index and MSCI EM Financials Index has dropped about $465 billion in three days.

Major northern Asia banks mostly have "minimal risk of the sudden run on deposits that crumpled Silicon Valley Bank” given their solid deposits, asset mixes and liquidity, Bloomberg Intelligence analyst Francis Chan wrote in a note. “Smaller lenders may harbour liquidity and credit risks that could easily be overlooked."

There are still concerns that financial firms could see an impact from their large investments in bonds and other financial instruments amid the SVB-induced turmoil. Two-year Treasury yields saw their largest one-day drop since the early 1980s on Monday amid expectations the Federal Reserve will hold off raising interest rates due to recent turmoil in the banking system.

"We need to assess the likelihood of an economic hard landing in the US and odds of a pivot on interest rates by the Fed," said Michael Makdad, an analyst at Morningstar Inc. "If these things do not happen, today’s move in Japanese financial stocks looks like an overreaction to me."

Meanwhile, Tim Mayopoulos, who was appointed as the new chief executive officer of the collapsed Silicon Valley Bank, on Monday informed the lender is open and conducting business as usual.

The US Federal Deposit Insurance Corporation had chosen former Fannie Mae head Mayopoulos to lead the newly created entity, named Silicon Valley Bank NA, reported news agency Reuters. The regulator took control of SVB following its failure that crippled global stocks and sparked fears of crisis throughout global markets.