Bundesbank emergency meeting after Silicon Valley Bank collapse – Sees no impact on European banks, ECB source

The German central bank (Bundesbank) convened its crisis team today to assess the potential impact of the US bank’s collapse Silicon Valley Bank in the domestic market, but no extraordinary meeting by the European Central Bank (ECB) is foreseen.

The American Authorities yesterday proceeded to take emergency measures cto boost confidence in the banking system as the failure of Silicon Valley Bank threatened to trigger a wider financial crisis.

The meeting of the Bundesbank’s strike team takes place in the middle plunge in Eurozone banking stocks, with that of Commerzbank falling 11% and Deutsche Bank 6.5%. This group was created during the global financial crisis of 2008 and is tasked with informing the Board of Directors and making recommendations, but does not have the authority to make decisions.

For Eurozone banks, decisions are taken by national supervisory authorities for smaller banks and by the ECB’s supervisory arm for larger ones.

A senior source in the ECB’s banking supervision said that the ECB has not had and will not have any extraordinary meetingwith its next scheduled meeting set for March 23-24.

Also, no announcement is expected from the Governing Council of the ECB, which takes the decisions on monetary policy.

The ECB source noted that Eurozone banks are generally well-funded and have done a good job of moving their bonds into held-to-maturity portfolios, meaning they are not forced to write down losses of their prices due to the increase in interest rates.

The same source noted that Eurozone banks generally have a more conservative asset mix than Silicon Valley Bank, which has been lending primarily to high-risk tech startups.

The source does not see any immediate impact on Eurozone banks from the collapse of SVB but warned that this could change if the impact in the US spreads to larger banks, raising the risk of dominoes.

At the same time, the president of the Eurogroup, Pascal Donahue he in turn said before the start of the meeting that Europe’s exposure to the SVB is limited and that the eurozone banking system is well prepared.