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KUALA LUMPUR – Economy Minister Rafizi Ramli has assured that Malaysian companies will not be directly affected by United States regulators terminating Silicon Valley Bank (SVB) in America’s biggest banking failure since the 2008 financial crisis.
Rafizi said while it is unlikely for Malaysian corporations to be impacted by the move, the local market might experience some minor effects if conditions surrounding SVB’s failure continue to deteriorate.
“There might not be any direct consequences (to Malaysia because of the SVB crash). I don’t think there are Malaysian companies with funds in SVB.
“But, if the collapse drags the US banking and the capital markets temporarily, it might (result in) some drags on (Malaysia) too, albeit at a much smaller scale,” he said in reply to a Twitter post yesterday.
This comes after US regulators pulled the plug on SVB on March 11, causing the sputtering of global bank shares with markets fretting over possible contagion from the event.
SVB’s implosion represents not only the largest bank failure since Washington Mutual in 2008, but also the second-largest failure ever for a US retail bank.
Little known to the general public, SVB specialised in financing start-ups and had become the 16th largest US bank by assets. At the end of 2022, it had US$209 billion (RM935 billion) in assets and approximately US$175.4 billion in deposits.
The company previously boasted that “nearly half” of technology and life science companies that had US funding banked with them, leading many to worry about the possible ripple effects of its collapse.
Financial agencies including the US Treasury said SVB depositors would have access to “all of their money” starting today, and that American taxpayers will not have to foot the bill.
The US Federal Reserve (Fed), Federal Deposit Insurance Corporation (FDIC), and Treasury said depositors in Signature Bank, a New York-based regional-size lender with significant cryptocurrency exposure which was shuttered yesterday after its stock price tanked, would also be “made whole”.
And in a potentially major development, the Fed announced it would make extra funding available to banks to help them meet the needs of depositors, which would include withdrawals.
FDIC guarantees deposits – but only up to US$250,000 per client per bank.
Federal banking law, however, would allow FDIC to protect uninsured deposits if a failure to do so would pose systemic risks, the Washington Post reported.
Bursa Malaysia continued its downtrend to open broadly lower today as market participants kept close watch on any potential downside risk to the financial situation following the collapse of Silicon Valley Bank.
At 9.10am, the benchmark FTSE Bursa Malaysia KLCI fell 19.08 points to 1,414.00 from Friday’s close of 1,433.08.
Bursa also ended the morning session lower on persistent selling pressure upon news that the New York Signature Bank is being shut down. – The Vibes, March 13, 2023