Prestige Economics President on SVB Fallout

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Mar 12, 2023 22:34 · 19.9k Views

Jason Schenker, President at Prestige Economics, discusses the latest developments with SVB. He speaks with Shery Ahn and Haidi Stroud-Watts on 'Daybreak Asia'.

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Transcript

  • 00:00 Just give us your thoughts as to what federal authorities and regulators have come through with so far does this address what you called broader systemic risks when it comes to the impact of higher interest rates or do you now see this has been contained because a lot of what happened at s VB seemed you know quite idIoT andra to its case.
  • 00:21 Yeah these are great questions hiding there's a lot to dig in on here I mean I think that the treasury f d c and Fed working together to keep depositors hold is something that could STEM a potential tide of further bank runs in the week ahead obviously closing and shuddering signature bank another preemptive move before something could go wrong keeping those depositors whole both at stb and and at signature could be really critical otherwise a lot of investors were becoming very.
  • 00:51 Concerned about the funds they had in different banks and you otherwise could see a broader spread of the bank I think that was their top priority to prevent that from happening obviously they would have loved to have found a buyer for SBB but without that the f d c stepping in to ensure well above that two hundred fifty thousand dollars threshold To Guarantee that all deposits will be kept whole.
  • 01:18 And Jason is this kind of the end of I guess the the huge amount of negative terrorists that was facing markets at the moment where do we go from here and are you watching I guess there's a lot of us are the outcome of the auction when it comes to the next steps v s VB and I guess broader questions into what happens now going forward for funding of the sort of you know VC Tech and niche business that SBB had established.
  • 02:17 Tensions here palpable for folks who work in Tech and of course that it not just in the us of course right silicon valley bank had other locations outside the us where they were funding where they had deposits all of these things major risks to Tech which is already under pressure and of course now there's a question right there's never just one Co roach like we'VE seen several banks here fall right silver gate s web.
  • 02:47 Signature all tied to ta and of course silvergate and signature tied to crypto which is already under lots of pressure the the question is now how many other banks out there are there that could still have problems despite the feds moves today and that's what they'VE taken such extreme measures to try to prevent other bank runs and failures as banks might be force to market to market any treasuries they hold but that's the question what else is there and of course equity and debt holder is.
  • 03:17 Unsecured detholders in s web will not be made hold just the depositors and also how did we get here adjason because you know us authoritiesities are coming out right now trying to emphasize that this is not two thousand eight that the banking industry is much more resilient than back then and yet we continue to see this risk STEM from parts that we didn't think that could happen are we going to see more scrutiny from here on out.
  • 03:45 Since we're talking about silicon valley bank let's invoke a saying that people in silicon valley often use which is move fast and break things and while people normally think that's just something that happens in Tech and that's a montrofor manyting Tech companies.
  • 04:01 The Fed needs To Be careful because the Fed shouldn't move fast and break things and we now see that the rapid move and interest rates can break things that banks that are holding treasuries if they're forced to mark to market right they're going to have a shortfall and if customers for financial institution are highly concentrated in an industry that's under pressure that's already having cash flow issues like crypto light Tech then they're going To Be forced to.
  • 04:31 Try to cover those shortfalls and this is where we find the problem compounds and there still could be some risks although today's statement does'till confidence and should restore general confidence in the us banking system.
  • 04:47 Does that mean that we're going to see the feds slow down or at least not do as much as it was expected before.
  • 04:56 They don't want to move fast and break things they're probably thinking very hard about how much they're going to raise interest rates but of course we don't have all the pieces of the puzzle and out this week to just kind of ADD to the questions of what comes next in the financial volatility on the fourteenth to march we're going To Get the CPI report for the month in February and we're likely to see you'on your rates still be very high and well above the feds two percent target.