Professor Dato' Dr. Mustafa Mohd Hanefah, Board Member of Universiti Sains Islam Malaysia (USIM) representing the Faculty said even though SVB's collapse was a byproduct of the Federal Reserve's hiking of interest rates by 1.700% in less than a year, the Board and Committee are also responsible to calm fears of its shareholders and depositors from pulling funds and prevent a panicked rush to withdraw money. The collapse of SVB in the US has grabbed international headlines.
USIMTV invited Prof Dato' Mustafa, former USIM Dean, Faculty of Economic and Muamalat (FEM) and Dr. Mohd Afzanizam Abdul Rashid, Head Economics & Social Financing, Bank Muamalat Malaysia Bhd, as panelists to discuss an interesting topic entitled, "The fall of Silicon Valley Bank: What can we learn?" The session was moderated by USIM Associate Prof Dr. Nuradli Ridzwan Shah Mohd Dali. It was attended by bankers, financial scholars, business professionals and banking students.
Prof Dato' Mustafa said, "SVB is a regional bank based out of California and it was the sixteenth largest bank in the US before the crash. The bank was a trendsetter as it was one of the early banks to focus on funding start-ups and venture capitalists which formed a big part of its loan portfolio. A bank collapse is never good news."
Dr. Afzanizam shared insights that, "The fall of SVB is rather unique because it's a case of asset liability management (ALM) mismatch concerns, which manifested into solvency issues for the bank. Hit by Covid, the deployment opportunities for funds were quite limited. Hence, deposits were channelised towards investments where there are two types of instruments - shorter duration investments classified as available for sale (AFS) and longer duration instruments classified as held maturity."
It was mentioned in the discussion that SVB Chief sold $3.6 million in stock days before the bank's failure which races to prevent bank run as Funds pulling out cash.
As for now, the impact of SVB's collapse does not impact the banking sector in Malaysia simply because Bank Negara has imposed tight control on banking operations.
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