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Treasury & Capital Markets
Asian markets adopt wait-and-see stance amid US bank meltdowns
Singapore says banking system remains sound and resilient, exposure to failed lenders insignificant
The Asset 14 Mar 2023

Most Asian equity markets ended lower on Monday (March 13), but no panic selling ensued following the collapse of three crypto-focused banks in the United States last week.

With investors apparently adopting a wait-and-see attitude, Hong Kong’s Hang Seng Index closed up 1.95% while China’s Shanghai Composite rose 1.2%, buoyed by the successful conclusion of the Two Sessions that put in place a new government in China.

Over the weekend US regulators launched an emergency programme to prevent the country’s largest bank failure since 2008, Silicon Valley Bank (SVB), from developing into a full-grown contagion of the financial system.

The dramatic chain of events started when Silvergate Capital announced on Wednesday last week that it was shutting down its operations and liquidating Silvergate Bank, a lender to the cryptocurrency industry, after a bank run resulting from the collapse of crypto exchange FTX last November forced it to sell its assets at a loss to cover US$8.1 billion in withdrawals.

The following day, US banking shares, including those of major players in the industry, plunged as panic spread across the sector. Over US$100 billion in the market value of US banks was wiped out last week alone, according to a Reuters estimate.

This was followed by SVB, a lender to crypto start-ups, which collapsed on Friday under the weight of deposit withdrawals amounting to more than US$42 billion. Then on Sunday regulators padlocked New York City-based Signature Bank, also a big lender to the crypto sector, to prevent the crisis from spreading further.

Emergency measures

The US regulators assured that “all depositors of this institution (Signature Bank) will be made whole” and “as with the resolution of [SVB], no losses will be borne by the taxpayer”.

The Federal Reserve and the Treasury created an emergency programme to support deposits at the two banks, using the US central bank’s emergency lending authority.

“We are concerned about depositors and are focused on trying to meet their needs,” US Treasury Secretary Janet Yellen said, but she ruled out any bailout. 

San Francisco-based First Republic Bank, one of those affected by the bank runs, saw its shares plunge in early Monday trading despite saying that it has received additional liquidity from the Fed and JPMorgan Chase. Meanwhile, HSBC acquired the UK subsidiary of SVB for £1 (US$1.21) in a deal that excludes the assets and liabilities of the parent company.

Singapore banks stable

In Singapore, the banking regulator on Monday sought to reassure the public that the country’s banking system remains sound and resilient amid heightened volatility in global financial markets following the recent closure of US banks.

The domestic currency money market and foreign exchange market continue to function well, the Monetary Authority of Singapore (MAS) says in a statement.

The country’s banking system has “insignificant exposures” to the failed US banks, MAS says, noting that banks in the city-state are well-capitalized and conduct regular stress tests against interest-rate and other risks.

“Their liquidity positions are healthy, underpinned by a stable and diversified funding base. These factors will allow them to weather potential stresses from global financial developments,” the regulator adds.

According to MAS, it is closely monitoring the domestic financial system and international developments, and stands ready to provide liquidity through its suite of facilities to ensure that Singapore’s financial system remains stable and financial markets continue to function in an orderly manner.

It says it is also in close touch with Enterprise Singapore to assess any potential impact of international developments on Singapore start-ups, including those with operations in the US. “The initial feedback indicates that the impact is limited. MAS and other government agencies will continue to monitor the situation closely for any signs of stress,” MAS adds.

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