At a time when interest rates are rising, companies that are not profitable, or profitable but have lots of debt, are most susceptible to higher borrowing costs, and he says this means that SVB was uniquely in trouble and that its demise is not reflective of wider problems within the banking sector.
He notes: “There are no listed European banks with a similar business model. Central banks have ample tools to support institutions with liquidity, including entire banking systems.”
Rupert Thompson, chief economist at Kingswood, agrees that SVB’s issues are not typical of the wider banking sector, saying: “While the collapse of SVB triggered memories of the global financial crisis, this time it really should be different.
"SVB was very much focused on tech start-ups and ran into problems as the rise in interest rates had led to deposit withdrawals and was forcing it to sell its government bond holdings at a loss.
"The problems SVB faced are not applicable to the large banks which do not face a run on their deposits and generally benefit, rather than suffer, from higher interest rates.”
That view is also shared by Paul Diggle, deputy chief economist at Abrdn, who says rather than the collapse of SVB signalling a crisis in the banking industry, it will mean conditions become even tougher for technology companies and those invested in that area of the market.
He adds the events surrounding SVB have shown the consequences of higher interest rates on some segments of the economy, and this may lead contribute to rates being cut.
Moëc says the events surrounding SVB are likely to make the Fed more cautious about the pace and scale of rate rises, but he also feels rates will continue to rise in the coming months.
The collapse of SVB may be a temporary market event, but even such events can scar clients portfolios for the long term, making whatever outcome is achieved deeply relevant for advisers.
David Thorpe is investment editor at FTAdviser
