The bankruptcy of Silicon Valley Bank (SVB), the crisis of Credit Suisse and the falls in the stock market have generated concern among Spanish savers. Authorities have called for calm and extolled the banks' strength. But the memory of the 2008 crash is fresh enough to remind us that it began with something similar: banks falling and the authorities calling for calm. What are the differences?

1. Is there a Spanish bank that looks like Silicon Valley Bank?

Neither by balance sheet, nor by risks, nor by solvency, nor by business model there are similarities. In terms of liquidity, which is what has most conditioned the fall of the Californian bank, an entity such as Santander, for example, accumulates 300,000 million euros in cash and central bank accounts.

2. Why did the SVP go bankrupt?

It is a bank with a very defined business model. Local technology companies that had accumulated a lot of cash during the pandemic deposited their savings in it. In turn, the bank used it to reinvest it in fixed-income bonds. It is an operation known as carry trade (receive short and invest long). In addition, it did not have hedges before possible depreciations.

3. But if you invested in low-risk assets, why did you fall?

The basis of everything is that their deposits were not sufficiently diversified. I had a lot of few customers. And this turned against him for two reasons when rates rose. Companies had a harder time financing themselves and began withdrawing their deposits. And, in addition, their bonds began to devalue (the higher rates rise, the less bonds are worth). When SVB sold bonds en masse to repay deposits, the accounting loss surfaced and unleashed nerves among its clients.

4. How is the structure of Spanish banks?

Much more diversified. First, there is much more cash, and second, much of the savings are from retail customers who are insured. This means that there is no risk of a scheme such as the SVB being reproduced. The asset is much more concentrated in loans. Therefore, the exposure of the asset to fixed income that is being devalued by the rise in rates is much lower. Financial sources explain SVB had 60% of its assets in public debt and 70% of it in long-term debt. Santander has 183,000 million in public debt, just over 10% of its assets. BBVA declares an exposure of assets at sovereign risk of 101,000 million, just over 13%.

5. And how are they in terms of liquidity?

The liquidity ratios of Spanish banks are also comfortable. Santander's LCR (ratio of liquid assets that prevent sales at a loss for 30 days) is 152%; BBVA and 159%. Sabadell, at 196%.

6. How is SVB similar to Credit Suisse?

Not at all. They are absolutely different crises and even so we can speak of contagion, as María Hernández explains in this chronicle. But there are several reasons that justify their problems. One of them is that, as a Spanish financier says, the governance of the Swiss bank left the Godfather Trilogy at the height of a cartoon series. Carlos Segovia tells here his serious management failures.

7. Is it enough to knock down a bank?

No, but in full financial panic one of its main shareholders assured in a very inopportune statement that he would not be willing to raise capital, which triggered the distrust of his depositors, who increased the pace of withdrawal of savings. Again, a bank with no initial solvency problems entered a liquidity crisis. The Swiss banking authorities have had to inject 50,000 million.

8. So, is there any possibility that any Spanish bank will get infected?

Reasonably, no. But in a banking panic the irrational component is very high and many customers can react if other entities arise problems. In addition, in the US there is a lot of opacity with respect to regional banking, which was not well supervised, as Pablo Pardo explains in this information. That is why the authorities insist on remaining calm and some entities have initiated explanatory campaigns with their clients. No bank can stand a massive withdrawal of deposits. That there are no reasons for it to occur, does not mean that it does not happen. The European Central Bank has sent a strong message of support to all banks. They will have liquidity when they need it. Those messages, of course, are launched so as not to be executed.

9. And if so, why do they fall on the stock market?

For fear of contagion and more. Banks had risen a lot since the last quarter of last year because they started from very low prices and saw better yields in the heat of interest rates. A correction was coming. On the other hand, SVB's experience made the markets predict that the rate hike could be stopped, so that the profitability of the banks would not grow as much as expected and their profits, therefore, would be lower. Finally, there is the market instability itself. Many funds need liquidity and sell stocks, and bearish investors take positions in the less strong entities in anticipation of steeper declines.

10. What if, despite all this, there is some cataclysm?

The Deposit Guarantee Fund covers the first 100,000 euros of each account in Spain. If everyone goes crazy and some entity goes into a tailspin, investors would lose their money, bondholders and savers from 100,000 euros per account and bank.

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