The European Central Bank (ECB) has claimed to “avoid the temptation” to relax supervision of those banks that invest in new technologies after the bankruptcy of Silicon Valley Bank (SVB), which concentrated both its lending and deposit-taking activities between venture capital companies, ‘fintechs’ and ‘startups’. After a Monday of high volatility, which ended in gains in the stock markets, this Tuesday these have been consolidated, with an Ibex that has climbed 2.45%, to 9,049.40 points with increases in bank values, the most punished in the days before.
“The best protection is to avoid those extreme business models that are very fragile in these situations, such as venture capital investments or crypto assets“, explained the president of the Supervisory Board of the ECB, Andrea Enria, in his appearance before the Committee on Economic and Monetary Affairs of the European Parliament, where the president of the European Banking Authority also spoke, Jose Manuel Campa.
Enria has pointed out that the case of Silicon Valley Bank is “particularly illuminating”, since more than 80% of its deposit base consisted of uninsured corporate deposits, which tend to be “more mobile” than others. This happened, he added, in a US regulatory context in which medium-sized banks, such as the SVB, are exempt or receive preferential treatment under the relevant prudential rulessuch as liquidity requirements –Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)– and capital requirements.
In addition, it has clarified that these banks are subject to less frequent stress tests than larger ones and may be allowed not to reflect certain types of losses in their regulatory capital, unlike also supervision in the EU banking system. , of which he has once again highlighted his “resilience”.
It has also indicated that, in general, European banks operate with a “more diversified” customer base, although uninsured deposits are also an important source of financing in the euro area.
However, Enria has warned that “sometimes it may be the case that there is a temptation to look favorably on banks or institutions that invest in new technologies”, which may give rise to relaxing supervision measures to make it easier for they “bloom”.
For his part, Campa stressed that the improvement in the supervision and governance of banks has also placed the EU “in a better position to assess risks more prospectively.”
However, he has urged to “remain vigilant” and avoid “falling into complacency”, because although the recent crises “demonstrate that, despite all the improvements in the capital and liquidity positions of banks, the improvement of regulation and supervision, bankruptcies and lack of confidence can still occur.