The collapse of Silicon Valley Bank has shown technology makes bank runs easier. Panic may also spread more fluidly across the world thanks to electronic media. European banks sold off heavily in response to the SVB failure in the US. In Switzerland, Credit Suisse was forced to seek central bank support.
How risky are European banks, really? SVB failed because it did not hedge interest rate risks adequately. Its deposit base was concentrated and largely uninsured. In contrast, most European banks have diversified risks, and decent capital buffers. However, Lex calculations reveal a wide spectrum of strength and weakness.
Several indicators merit monitoring. A high concentration of flighty corporate deposits is one. Almost all of SVB’s deposits belonged to businesses. These represent up to 30 per cent of total liabilities for just a handful of European banks, according to S&P.