Australian banks have been the big hold-outs amid a global sell-off in financial stocks as the SVB collapse has forced investors to query the strength of bank balance sheets, writes Karen Maley.
Investors are continuing to reel from the aftershocks of the collapse of Silicon Valley Bank, which has sent US and European bank stocks plummeting amid growing fears that heightened risk aversion will crimp global growth.investors have started to worry about the unrealised losses that big banks have suffered as bond prices have plunged over the past year.
Banks are allowed to hold the bonds on their balance sheets as costs if they label them as “held to maturity” for accounting purposes, even if the bonds are now trading at prices well below what the banks paid for them. This compares with losses of $US36 billion for similarly classified bonds at JPMorgan Chase, $US41 billion for Wells Fargo and $US25 billion at Citigroup.
“Calm down, calm down, and look at the reality!” he implored investors on Monday afternoon. “The reality is that the French banking system isn’t exposed to SVB. There are no connections between the different situations.” Despite Bruno Le Maire’s entreaties, French banks were also hard hit, with BNP Paribas falling 6.8 per cent, and Société Générale down 6.2 per cent.
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