Failed US banks ‘pose few risks’

Failed US banks 'pose few risks'

Authorities keeping eye on domino effect

Traisuree: No Thai investments
Traisuree: No Thai investments

Prime Minister Prayut Chan-o-cha has ordered all relevant officials to keep an eye on the impact of the collapse of Silvergate Bank and Silicon Valley Bank (SVB) in the United States on Thailand’s financial system.

Traisuree Taisaranakul, a deputy government spokeswoman said on Monday that the collapse of the two banks in the US last week caused fluctuations worldwide in money and capital markets, but was unlikely to have any impact on the Thai economy.

Thai financial institutions neither invested in nor made any transactions through the two banks, she said.

The impact on the financial sector of the US was expected to be limited because the business areas of both banks were limited, and US authorities quickly resolved related problems, Ms Traisuree said.

Financial institutions in Thailand were strong because they have been serious about managing risk since the 1997 economic crisis, she said.

“Despite many global financial crises and the Covid-19 crisis, Thai financial institutions, commercial banks, and state-owned banks continue to support the Thai economy with their strong status,” the government spokeswoman said.

She said that at the end of last year, Thai commercial banks had a capital adequacy ratio (BIS ratio) of 19.4% and a liquidity coverage ratio of 197.3%. Non-performing loans formed only 2.73% of all loans, and the NPL coverage ratio was as high as 171.9%.

The Deposit Protection Agency had a 134-billion-baht fund to protect the money of 98% of depositors, Ms Traisuree said.

Meanwhile, a report from Bloomberg showed that some Asian technology firms have disclosed cash deposits at troubled US lender SVB, known for its deep ties with the sector, with most emphasising the amounts were immaterial to their operations.

At least a dozen Hong Kong firms, mainly involved in biotechnology, listed SVB as their banker in exchange filings, according to activist investor and founder of David Webb. That puts hundreds of millions of dollars at risk for these small-cap firms, of which many are in their early stages of operation and unprofitable.

Elsewhere, Japan’s SoftBank Group Corp is seen as potentially one of the most exposed firms to the ongoing crisis, given its huge investments in technology. The conglomerate has an undisclosed stake in OakNorth Bank Plc, which is in talks to buy the UK arm of SVB. Chinese state-owned lender Shanghai Pudong Development Bank Co could also be affected as it has a venture with SVB.

“Most think that SVB is an idiosyncratic risk that is being bailed out by the US authorities,” said Hao Hong, chief economist at Grow Investment Group. “For now, the market is choosing to overlook these technical details.”

Bloomberg also reported the Asian companies that have disclosed their exposure to SVB, or are tied to the failed US lender.

In China, Shanghai Pudong Development Bank Co, the state-owned Chinese lender, owns a banking venture with SVB. SPD Silicon Valley Bank said in a statement it has always operated in a stable manner in accordance with Chinese laws and regulations and has an independent balance sheet.

Andon Health Co and its units had deposited about 5% of their cash and financial assets at SVB as of March 10, according to a statement.

In Hong Kong, Brii Biosciences Ltd said in a stock exchange filing that less than 9% of its total cash and bank balances was held at SVB as of Feb 28. It’s working closely with SVB and the Federal Deposit Insurance Corporation (FDIC) to minimise any potential impact.

In Japan, startups in which SoftBank Vision Fund of SoftBank Group Corp has invested have deposits with SVB as well as loans from it, and there were concerns that they risked being hard-pressed for cash flow due to the SVB bankruptcy.

In South Korea, National Pension Service, the Korean public pension fund, had a 0.17% stake in SBV Financial Group as of the end of last year’s fourth quarter.