“We do not see any impact of SVB on the banks of the eurozone and, of course, on the Greek ones,” emphasizes with his statement on “K” TTE commander Yannis Sturnarasnoting that SVB “special case”, the working model of which is not found in Europe. Referring to the US authorities who rushed to secure depositors despite the fact that SVB deposits were outside the deposit guarantee limits (as they are in the EU and the US), Mr Sturnaras points out that “the reaction was very quick and efficient to eliminate any possibility of creating a panic.”

The encouraging implications they can have on Greek banking system cases of such bankruptcies are also estimates from banking sources in our country, explaining that SVB is a non-systemic US bank with a very special and unique structure of its balance sheet, focused on technology start-ups, venture capital and private equity, at a time when the vast majority of its deposit base (about 87%) was outside the guaranteed deposits.

“The likelihood of such a phenomenon in Europe is extremely small for a number of reasons related to the fact that the operating model of European and, of course, Greek banks is completely different in terms of structural characteristics, and also for reasons that are related to the supervisory and institutional structure”, – explains “K” the managing director of the group of companies “Eurobank” Fokion Karavias..

Specialized bank

Firstly, SVB was a specialized bank that carried out certain venture capital related banking activities and thus had very focused risks on its balance sheet, unlike Greek banks which, as Mr. Caravias points out, “they have diversified into many branches of banking such as retail and business lending to large, small, medium or small businesses.”

Bond rate

We do not see any effects from SVB, emphasizes “K” Chairman of the Board of Directors Yiannis Sturnaras.

Secondly, the percentage of bonds in relation to its deposits that the Greek bank has is about 15% compared to 80%, which was the corresponding percentage of SVB. In addition to the conservative risk of government securities that Greek banks hold, their balance sheets are protected by the hedging rules they apply to their bond portfolio. This is the opportunity provided International Financial Reporting Standards (IFRS) applied by European banks, as opposed to American Accounting Standards (GAAP), which do not allow the application of hedging rules for a portfolio of bonds held to maturity in non-systemic banks. It should be noted that, as a non-systemic bank, SVB has been exempted from specific regulatory restrictions on liquidity, interest rate risk and capital.

Regular stress tests

Third, commercial systemic banks in Europe must follow very specific rules and regularly undergo stress tests on their balance sheet structure in terms of liquidity outflows and deposits, interest rate risk and regulatory capital. They also have significantly different deposit base and composition of assets. In particular, Greek systemic banks have a strong diversified retail deposit base, with the vast majority of deposits within the guarantee limits of EUR 100,000 per depositor and per lending institution regardless of the number of accounts. The loan-to-deposit ratio of Greek banks is relatively low and, according to him, European Central Bankapproaches 61% and is one of the healthiest figures in the EU.

At the same time, the loan portfolios of Greek banks mainly have a floating interest rate, respectively, and deposits also have a floating interest rate, the interest rates of which are adjusted in accordance with the policy of the ECB. Thus, their structural balance is much more balanced than that of the SVB, which had floating rate deposits on the one hand and fixed assets on the other. Thus, on the asset side, SVB retained a significant amount of investments whose characteristics did not match the liquidity and interest rate profile of their depositors.

Liquidity mechanism

The fourth and no less important factor is the fact that the ECB already has proven institutions to provide liquidity to the banking system. This is the ELA (Emergency Liquidity Assistance) mechanism, thanks to which, as the head of the Eurobank points out, “Greek banks have maintained their liquidity, despite the massive outflow of deposits during the crisis.” As a result, the European banking system may face even extreme conditions in terms of liquidity scenarios.

Increasing interest rates

The collapse of Silicon Valley Bank and the turmoil it caused in the US banking system and markets on both sides of the Atlantic is expected to influence the decisions of the two central banks at their upcoming meetings. Officials close to the ECB expect they will face a sharp reaction from those of its leaders who are in favor of another aggressive increase in interest rates. As for the Federal Reserve, which meets on March 22 and is now thought certain to continue with another major rate hike, Goldman Sachs now believes it will avoid it, citing “recently difficult conditions” in the financial sector. According to CNN, the prevailing view on Wall Street is that the Fed’s stance is somewhat responsible for US bank failures, as it continued aggressively raising interest rates, which led to falling bond prices in their portfolios. and cause a recession.