SVB collapse offers lesson for China: State media

The collapse of Silicon Valley Bank (SVB) will not affect China’s financial system, but it will provide an important lesson for the country’s banking industry, according to the official Securities Times.

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,” according to a media editorial. Wednesday.

Friday’s SVB closure rattled global markets, prompted US President Joe Biden to rush to reassure the financial system, and prompted the US to take emergency action to give banks access to more funding.

In China, shares of smaller lenders, including Bank of Lanzhou, Xi An Bank and Xiamen Bank, have lagged far behind major banks last week amid concerns about their ability to manage risk.

Smaller banks in China, more vulnerable to interest rate risk, could suffer from shrinking interest rate spreads and investment losses during the rate hike cycle, GF Securities said in a report this week.

The Securities Times reported that while the SVB incident reflects deregulation of such banks in the United States, a series of financial regulatory reforms in China in recent years have led to an industry cleanup, a curb on shadow banking and a reduction in financial risk.

In addition, China is closing legal loopholes, the editorial says. In the latest move, China said last week it would create a new national financial regulator that would unify oversight of the industry.

“Although the SVB incident will not have a significant impact on China’s financial markets, China’s financial industry still needs to seriously learn from this lesson and always prioritize risk prevention and control,” the paper said.

SVB’s joint venture in China also sought to allay concerns among clients and investors, saying on Saturday that it has a solid corporate structure and an independently managed balance sheet.