SVB Collapse: It is too early to call the all-clear on the sector – ING

Economists at ING asses the Silicon Valley Bank fallout.So far the system looks fine, but it needs to be treated with caution ahead, just in case.

The system is under scrutiny, but fine so far

“We need to accept that some banks will come under pressure at this stage of the interest rate cycle. The Fed has hiked from zero to near 5%. Moreover, starting from zero rates means a bigger rate sensitivity to hikes (think duration).” 

“If some balance sheets get eroded by a ratcheting down in market valuations, and become an eyesore, before you know it there are trust issues to deal with. Big banks are less affected; they have to meet tougher hurdles to begin with. But there could well be further stress in the smaller bank sector.”

“This could and indeed probably should all blow over. But we need to also let a bit of time pass before we can be sure.”