US bank collapse to hit sharemarkets

Chalmers said initial advice from regulators was that “any fallout for Australia’s broader financial system is unlikely to be significant”.

“Australians should be reassured that our institutions are solid, our banking sector is well capitalised, and we’re in a better position than most other nations to deal with the challenges we face in the global economy,” he said.

‘This is not a Lehman’s moment, this is not a globally significant bank.’

Hugh Dive, chief investment officer at Sydney’s Atlas Funds Management

Commonwealth Bank of Australia shares slid 3.2 per cent on Friday, National Australia Bank was down 3 per cent, while Westpac and ANZ each lost 2.6 per cent.

However, Hugh Dive, chief investment officer at Sydney’s Atlas Funds Management, said the Friday market reaction appeared significantly overdone, and stressed that the impact of the collapse would be nothing like the fall of Lehman Brothers at the start of the 2008 global financial crisis.

“This is not a Lehman’s moment, this is not a globally significant bank,” Dive said. “It’s a relatively small bank and had a relatively narrow focus … most Australian investors hadn’t heard of it on Friday morning.”

Australian banks on Sunday were assessing if they had any indirect financial exposure to Silicon Valley Bank, before determining if they needed to notify the stock market.

Commonwealth Bank, ANZ, Westpac and NAB all declined to comment.

Dive said he would be shocked if any major Australian bank had a significant exposure to the collapse, as they were well-diversified and had largely pulled back from much of their more exotic, offshore activities.

He said the US bank’s troubles were a symptom of the troubles facing the tech industry, which had been enjoying a period of zero interest rates and investors “willing to throw money at them”.

“In an environment where rates are going higher, these companies are facing material costs of debt that are putting them under a lot of pressure,” he said.

Barrenjoey chief macro strategist Damien Boey said Silicon Valley Bank’s liquidity problems were “awakening market bears” – not because the bank is globally significant, but because investors were looking intently for where policy tightening was hitting the economy.

Boey said Barrenjoey was concerned there could be “other canaries in the coal mine” in the US commercial real estate sector.

“It appears that the technology sell-off last year in response to Fed tightening is now having an impact on the ground,” he said. “We do not think that matters will end with Silicon Valley Bank either, with U.S. commercial real estate struggling with funding availability from commercial mortgage-backed security markets and banks.”

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