SINGAPORE: Local bank stocks fell when the market started yesterday morning. Due to concerns that the crisis enveloping Switzerland’s second-largest bank and a succession of US bank failures will spread globally and affect financial stability.
The bank has taken a beating after Credit Suisse dropped as much as 30% on Wednesday. After its largest shareholder, Saudi National Bank, said it would not make any additional investments in the institution. Due to regulatory concerns.
For large international banks following the 2008 financial crisis, the cost of one-year bond default insurance for the bank has increased to levels never before seen.
Nevertheless, yesterday afternoon, after the bank obtained a 50 billion Swiss franc (RM243bil) lifeline from the Swiss National Bank. The Credit Suisse shares recovered and surged by at least 30% in pre-market trade.
The benchmark Straits Times Index was down 0.55% to 3,155.54 at 5 PM on Asian stock markets, which had reduced losses but were remained down.
Stocks of local banks also reduced their losses, which had previously reached above 1%. OCBC down by 0.98% to S$12.15 (RM41), DBS fell by 1.27% to S$32.55 (RM109), and UOB fell by 0.71% to S$28 (RM94).
The failure of US mid-sized lender Silicon Valley Bank (SVB) and the closing of Signature Bank in New York state over the last week have shaken financial markets all around the world.
It was necessary for US regulators to intervene. And offer assurances that all depositors from SVB and Signature Bank would get full repayment.
A new financing scheme that permits one-year loans to banks. With more lenient terms was also made possible, with up to US$25 billion (RM 113 billion) made accessible.
Silvergate Bank, a lender with a concentration on cryptocurrencies, declared earlier last week that it would wind down and voluntarily liquidate its activities.
Kelvin Tay, chief investment officer for Asia-Pacific at UBS, said markets are clearly battling with three inter-related but different challenges – bank solvency, liquidity and profitability.
“Fears about bank solvency are obviously exaggerated because the majority of banks—including European banks—have solid liquidity positions, and depositors are still well-protected.
But if funding circumstances continue difficult for a lengthy period of time. A number of specific banks may need central bank liquidity support. Which is why there was concern about Credit Suisse when its largest shareholder ruled out more support, he added.
Glenn Thum, an analyst with Phillip Securities Research, noted that the customer bases of Singapore banks and Credit Suisse are very different. Credit Suisse’s clients tend to be wealthy individuals and businesses. While Singapore banks’ clients tend to be small and medium-sized businesses and regular savers.
The entire risk and exposure to Singaporean banks is therefore little, he claimed.
Having said that, the recent failures and news would have an effect on the market as a whole. And there would be a further slowdown in loan growth. Which might have an influence on the development of Singaporean banks.
The Monetary Authority of Singapore (MAS) stated earlier this week that despite increased volatility in the global financial markets, local banks in Singapore had “insignificant exposures” to the collapsed American institutions.
“Banks in Singapore have adequate capital and regularly test their resilience. Their funding bases are steady and diverse, supporting strong liquidity situations. These elements will help companies to withstand any strains brought on by anticipated changes in the world economy, according to MAS.