IBK Securities: "SVB Bankruptcy Unlikely to Spread US Financial Crisis"

On the 10th (local time), the US Silicon Valley Bank (SVB), with total assets of approximately 276 trillion won, went bankrupt. IBK Investment & Securities stated on the 13th that "the possibility of this incident spreading into a systemic crisis in the (US) financial market, like in 2008, is low."

IBK Investment & Securities researcher Kwon Ki-jung said in a report on the SVB incident that "the US government is taking swift actions such as promptly deciding on the bankruptcy," and "if the US Federal Deposit Insurance Corporation (FDIC) finds a new acquiring company for SVB, the anxiety is likely to ease." He also cited that compared to other major US banks, SVB's main customers are concentrated in Silicon Valley IT companies, and that special factors such as excessive interest costs due to SVB's increased holdings of US Treasury bonds contributed to the bankruptcy.

Researcher Kwon also expected the impact of this incident on the domestic financial market to be limited. He said, "The proportion of government bonds in the fund management of domestic financial institutions is at a low level," and "although US and domestic government bond yields rose sharply in February due to the Federal Reserve's tightening burden, market interest rates are expected to partially reverse the recent rise amid relief from the SVB incident and the slowdown in US employment indicators."

He positively evaluated the prompt response by the government and financial authorities, including Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho and Financial Services Commission Chairman Kim Ju-hyun. They held a regular meeting on macroeconomic and financial issues the previous day to assess the domestic impact of the SVB incident.

However, IBK Investment & Securities pointed out the need for caution in credit (corporate bond) investments in the short term. Researcher Kwon said, "The project financing (PF) market remains a place of concern in the current situation, and the credit sector is likely to be the most sensitive to the US SVB incident," adding, "Although the downward trend in the 91-day CP rate, which serves as a benchmark for the short-term money market, and continuous government monitoring are expected to gradually ease concerns, considering the forecasted contraction in the real estate market and the increasing trend of unsold housing units, a conservative stance is recommended for the time being." He further added, "Until additional measures from domestic and US policy authorities regarding the SVB incident are announced, it is reasonable to increase the proportion of government bonds rather than credit."