Banking crisis in the United States: Europe fears contagion from Silicon Valley Bank

Despite the fact that bankruptcy is smaller in the EU, European governments are already studying the impact that its fall may have.

The activities in Europe of Silicon Valley Bank, the 16th US bank now closed and placed under the administration of the authorities, which guarantee all deposits, seem too limited to provoke the wind of fear that they are raising. Also if the fall of the New York Signature Bank is taken into account.

The bank, almost unknown in much of Europe, has only four small subsidiaries in the old continent: in Germany, Denmark, the United Kingdom (which will pass into the hands of HSBC in exchange for one pound sterling, the price of a pack of bags garbage) and Sweden.

But European governments are already studying the impact that its fall may have in sectors such as the financing of technology startups or pension funds.

Combination of logos of European banks affected by the crisis in the United States. Photo: AFP

The Bloomberg agency reported this Monday that it had managed to identify a handful of companies, especially in the technology sector, that have financing from Silicon Valley Bank and pointed to the Polish video game manufacturer Huuuge.

Another form of involvement would be that of the largest Swedish pension fund, which would be the fourth largest shareholder of the US bank. But that exposure would be limited to $605 million.

Despite this limited activity in Europe, the stock markets of the old continent fell sharply because they fear that Silicon Valley Bank is not the only bad apple. Frankfurt, Paris and London lost almost 3%, Madrid was close to 3.5% and Rome exceeded 5%.

The logo of the German Commerzbank on a building in Frankfurt. Photo: Amelie Querfurth / AFP

Among the banks, the correction suffered by the German Commerzbank stood out, which lost 13.0%. Also suffering considerable losses were the German financial giant Deutsche Bank (-4.3%), the French BNP Paribas (-6.2%) and its compatriot Société Générale (-5.8%), the Spanish Santander (-7.2 %) and BBVA (-8.0%). Italian banking was heading in the same direction.

dollar, haven

The euro also fell a bit against the dollar from 1,069 on Friday to 1,067 at noon on Monday. The US currency is a haven asset for European investors. The price of gold also rose and the interest that European national Treasuries had to offer to place their bonds fell, another symptom of a fear movement that seeks safe assets.

A source from Clarín in the European Commission, who was already close to the command posts in the Executive arm of the European Union when the financial crisis of 2008 broke out, said this Monday: “Let us remember that in 2008 the European Union saw the fall of Lehmann Brothers and his first reaction was to demand that the United States sweep up the rubbish so that it would not stain Europe. But Europe suffered that crisis more than the United States. Silicon Valley Bank is not Lehmann Brothers nor does it have as many activities in Europe, but it seems clear that it is not the corner store either.

On Monday morning, the European authorities saw how US regional banks were preparing to lose more than 50% of their share price as soon as Wall Street opened. If each of them can be considered small, together they begin to make a snowball.

Shareholders and depositors flee small banks for the safety of larger ones, a move not seen in Europe, where the crisis is not expected to cross the Atlantic.

For the European media, the implications of the fall of Silicon Valley Bank are one of the big economic news so far this year. The entire online opening of the economic ‘Financial Times’ is devoted to the matter.

The next few days will decide if it was a passing fever or if the northern powers got into another financial crisis for not having closely followed the risks taken by their banks.

The Eurozone Finance Ministers, meeting this Monday in Brussels, put the matter urgently on their agenda. The messages were all similar: there is no risk, there is no exposure, there is no reason to be afraid, much less panic.

Brussels, special for Clarín

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