listened to the news of the U.S. bank failure all weekend and voiced concern about its aftermath, but today (13th) there was no major shock to our financial markets. Contrary to expectations, the stock price rose today and the exchange rate fell by more than 20 won, because the US government reacted hastily as you can see, and this incident raised expectations that the US Fed would not raise interest rates sharply in the future. But you can't let your nerves go.
Yoonha Cho is a reporter.
When the news of the bankruptcy of
Silicon Valley Bank was heard, the market first thought of the Lehman Brothers bankruptcy that led to the financial crisis in 2008.
Both were due to deteriorating asset quality at banks, with non-performing loans and complex derivatives entangled the crisis around the world, but in this case, it invested in U.S. Treasuries, which are ultra-blue-chip safe-haven assets, which were overweighted, triggering a spike in interest rates and a failure to diversify risk.
That's why we don't expect this incident to lead to the insolvency of the financial system in all directions.
Domestic banks are still in good health, and their asset management is mainly lending, so high-interest shocks are limited.
In fact, the National Pension Service and the sovereign wealth fund Korea Investment Corporation hold 300 billion won and 60 billion won worth of shares of the parent company of Silicon Valley Bank, respectively, so some losses are inevitable, but financial authorities believe that there is almost no direct investment from domestic institutional investors.
But it's hard to let your guard down completely.
Regional small and medium-sized U.S. banks could be at additional risk, leading to short-term shocks in financial markets and increased volatility.
In addition, if startups' funding runs dry up and corporate insolvency grows, it could stimulate an economic slowdown.
[Park Sang-hyun/Senior Research Fellow, Hi Investment & Securities: If the wave of the SVB (Silicon Valley Bank) crisis itself spreads further, there is a part where the money crunch may intensify, which will lead to a lack of liquidity in the dollar.]
As this incident showed that the high-interest rate counterattack can spill over not only to the real thing but also to finance, the government and the Bank of Korea plan to hold an emergency macroeconomic and financial meeting tomorrow to closely monitor the ramifications and discuss the need to respond.
(Video Interview: Kim Kyun-jong, Jeon Kyung-bae, Video Editing: Yu Yu-yang)
▶ U.S. Bank Adds Bankruptcy to "Protect All Deposits"
"Big step hard" rather relieved?
Over the weekend, we listened to the news of the U.S. bank failures and voiced concern about the aftermath, but there was no major shock to our financial markets today. Contrary to expectations, the stock price rose today and the exchange rate fell by more than 20 won, because the US government reacted hastily as you can see, and this incident raised expectations that the US Fed would not raise interest rates sharply in the future.