Consultant predicts SVB bankruptcy will have ‘limited economic impact’

Advisory firm Crédito y Caución predicted this Monday that the bankruptcy of Silicon Valley Bank (SVB), the sector’s largest since 2008, would have a limited impact on the economy, but noted that credit could tighten.

“We hope that worries will dissipate as confidence recovers thanks to the administration’s liquidity support measures, implicit guarantees and evidence that systemically important banks are not affected by the contagion,” said Dana Bodnar, an economist at Atradius. quoted in a statement released on Monday.

The disappearance of the SVB, which held the money of nearly half of North American venture capital-backed “startups,” the consultant said, “would limit the credit lines of many Silicon Valley mid-sized companies and possibly mark the end of the venture capital model that spurred the sector forward.” “.

Crédito y Caución also noted that “the financial sector is expected to be more stringent in lending, which is already characterized by high interest rates.”

In this sense, companies will have to choose between passing new financial costs into final prices or absorbing them through lower margins, which will affect profitability and credit risk.

The consultant also foresees that companies that need to refinance their debt at higher interest rates, and those sectors that depend on the financial capacity of families – cars, construction, real estate or durable goods – will “be hit the hardest”, while such sectors like pharmaceuticals, chemicals, oil, gas, raw materials or metallurgy are “performing better”.

The consultant also notes that financial sector balance sheets in the US and the euro area are more capitalized than in 2008 (the previous crisis), but at the same time, politicians “have a difficult task to balance the fight against inflation.” economic downturn and heightened financial risks.”

“An inevitable consequence of tightening monetary policy is that credit will become more expensive for families and businesses,” warns Crédito y Caución, adding that “at the same time, bond portfolios lose value as interest rates rise, as regulators must monitor the impact of the interest rate on jumps in financial balance sheets.

The Silicon Valley Bank has been under the control of the US Deposit Guarantee Agency (FDIC) since March 10, having reopened last Monday.

The bank became insolvent after a major customer withdrawal, and its collapse represents the largest bank failure in the United States since 2008.