China and Japan have been wary after the collapse of the US-based Silicon Valley Bank. While China said that there is a lesson to be learned from the incident, Japan believes the difference in structure of bank deposits means that it is unlikely to see a similar crisis.
China’s Securities Times newspaper said that an SVB-style bank failure is unlikely to happen in China but the incident would have "important implications for the development of China's small- and medium-sized lenders, and the stability of China's financial system".
The newspaper said that China cleaned up its banking industry through a slew of financial regulatory reforms, thereby curbing shadow banking and reduced financial risks. The editorial said that China has been closing regulatory loopholes, and set up a new national financial regulatory body last week.
"Although the SVB incident won't have material impact on China's finiancial markets, China's financial industry still needs to earnestly learn from this lesson, and always prioritise risk prevention and control," the newspaper said.
Meanwhile, Finance Minister Shunichi Suzuki said that Japan's banking sector won't face incidents similar to SVB collapse due to differences in the structure of bank deposits. "Japan's financial system is stable as a whole," said Suzuki at the Parliament, further adding that banks have sufficient capital buffers against risks.
The losses suffered by Japanese banks on their foreign bond portfolios have been mostly offset by profits from stock holdings, Suzuki said. "For now, the chance of something similar to SVB's collapse happening in Japan's banking sector is low," Suzuki said.
Regional lenders in Japan face smaller risks of a bank run because their deposits consist mostly of small-sized ones for individuals, unlike the fast-moving, big deposits of SVB, he said. SVB’s bond portfolio have highlighted risks for Japanese lenders' gigantic foreign bond holdings, which are carrying over $30 billion in unrealised losses
China's smaller banks are more vulnerable to interest rate risks and could suffer from shrinking interest spreads and investment losses during a rate hike cycle, GF Securities said in a report this week. SVB's China joint venture has also sought to ease fears among clients and investors, saying that it has a sound corporate structure and an independently operated balance sheet.
(With Reuters inputs)
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