The difficulties at the Silicon Valley Bank shook the financial world.
Investors are also worried in Germany.
How bank professor Hans-Peter Burghof sees the situation.
Munich - The closure of Silicon Valley Bank in the US has unsettled investors worldwide.
The German stock exchanges also slipped into the red again at the start of the week.
Many industry observers see parallels with the Lehman bankruptcy of 2008, which plunged financial markets worldwide into a crisis.
Right?
What Prof. Hans-Peter Burghof from the Chair of Banking and Financial Services at the University of Hohenheim says about how dangerous the situation is for German savers.
Prof. Burghof, after the collapse of the Silicon Valley Bank (SVB), the US government intervened.
All deposits at the SVB and the New York Signature Bank, which also got into trouble, are guaranteed by Washington.
Is the feared bank run, i.e. the run on other US banks, off the table for now?
The US authorities managed to act quickly and sent a very strong signal.
That should stop a possible run on bank deposits in the US.
And has the danger of a second Lehman crisis for the banking system been averted as well?
The Silicon Valley Bank is a very special institution.
Its crisis is exacerbated by its special business model as a bank for the start-up scene in Silicon Valley.
The bank mainly had large deposits from young tech companies that had far too much money due to the tech bubble.
Now their owners, large venture capital funds, have been urging these companies to withdraw their deposits from Silicon Valley Bank.
In order to serve this massive withdrawal of deposits, the bank had to sell a large volume of its low-interest securities, with high losses because of the sharp rise in interest rates in the meantime.
A bank run as a concerted action by the venture capital industry, so to speak, and a very special situation that is actually not suitable as a trigger for a global financial crisis.
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Logo of the Silicon Valley Bank: The SVB is considered the credit institution for start-ups in California's Silicon Valley.
© Jaap Arriens/IMAGO
But similar to the SVB, many other banks around the world also have bonds in their portfolios.
However, these papers have lost value due to interest rate increases by the US Federal Reserve or the ECB.
What risks are still lurking there?
In addition to bonds, banks also have other fixed-interest investments, such as loans.
There is also an interest rate risk here.
The refinancing of bank balance sheets on the deposit side, on the other hand, often takes place with no or only short-term fixed interest rates.
When bank deposits become more expensive at a much faster rate than the income from their investments increases, the bank has the potential to make losses.
In addition, many banks also have large positions in interest rate derivatives, from which individual institutions could suffer significant losses.
However, after so many years of intensive regulation, risk management at institutions should have such risks under control.
And the risks are offset on the positive side by higher returns from an increased interest margin:
Due to the higher interest rates and the scarcity of capital, the banks can push through a higher price for their financing service in relation to the refinancing costs.
So actually a very good perspective for the banks, but more in the medium term.
In addition, many German banks are very reluctant to pass on the rise in interest rates to their depositors, much to the annoyance of consumer advocates and some customers.
What effects does the development in the USA have on Germany?
In the US, there is concern that many of Silicon Valley's early stage tech companies could find themselves in trouble as a result of the failure of Silicon Valley Bank.
These companies are central to the US economy as drivers of innovation and growth.
This is probably one of the reasons why the American government is so quick and determined to secure the funds at the Silicon Valley Bank.
I don't see any direct effects for Germany, but I do see a reassessment of interest rate risks on bank balance sheets.
The ECB only reacted to inflation very late and must therefore raise interest rates very quickly and significantly.
This will make the hole in bank earnings caused by the rapid rise in interest rates unnecessarily large.
However, my impression is that most institutes are well prepared and have at least partially hedged against interest rate risks on the market.
Because this situation does not come as a complete surprise.
Hans-Peter Burghof: The ECB took itself completely by surprise.
The ECB took itself completely by surprise.
Prof. Hans-Peter Burghof, Chair of Banking and Financial Services at the University of Stuttgart Hohenheim.
On Monday, the Commerzbank share was hit hard in the Dax.
Investors had already punished Deutsche Bank on Friday.
How do you assess the situation at Germany's largest bank?
Is there a higher risk here than with other German financial institutions?
In my opinion not.
But Deutsche Bank represents the German banking market in a special way and is listed on the stock exchange.
One can therefore read the general revaluation of the German banks at these institutes directly from the stock exchange price.
How safe is the money of savers in this country?
Do you have to worry about developments in the USA?
I don't see any danger at this point.
We have a very differentiated security system, and behind it, for investors with smaller investment sums, there is ultimately also a guarantee from the state.
But we're not that far yet.
So far, after years of crisis, especially at the large institutions, German banks have again achieved very respectable results and are benefiting from the rise in interest rates.
In addition, the large institutes have withdrawn from some business areas through which a crisis in the USA could spread to them.
So as long as the German economy continues to run relatively well and does not collapse massively, I see no serious danger here.
Under these conditions, the security systems in Germany can absorb individual problem cases well.
How does the Bafin have to react now: review the credit institutions' bond portfolios or even carry out new stress tests?
The BAFin is part of the European supervisory system.
And within this framework there are already such stress tests, in principle on an annual basis.
However, the interest rate scenario tested was much less drastic than the real increase in interest rates that has now taken place.
This is particularly piquant, since the ECB is responsible for monetary policy and thus essentially for the rise in interest rates, and on the other hand it also carries out the stress tests in its function as banking supervisor.
It has completely surprised itself in this negative sense, which is not a good sign of the quality of European banking supervision.
Testing again after the child has fallen into the well makes little sense.
It is crucial that banks have sufficient reserves, and this appears to be the case.
However, banking supervision must ensure that
that the bank bosses do not try to cover up possible losses from the interest rate situation with high profits from entering into very risky transactions.
Historical experience shows that such "gambling for ressurection" can drastically exacerbate the effects of problems in the banking sector.
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