The rise in central bank interest rates causes a reduction in the balance sheet of banks, and can weaken certain establishments, even if the risk is “generally contained”, underlined Thursday in a note the financial rating agency S&P Global Ratings. .
The monetary tightening is rather good news for the banks, which are seeing their interest margin improve. But higher rates have also caused a decline in the value of financial assets that banks hold on their balance sheets, says S&P Global Ratings.
The bonds acquired before the upward movement yielding less than the new stakes, and logically undergo a strong devaluation on the market, resulting in losses for the bank if it wishes to resell them.
In some cases, as recently illustrated by the Silicon Valley Bank, this can contribute to a major deterioration in the financial profile of a banking establishment, explains the rating agency.
To cope with a massive and sudden amount of withdrawals, the American bank SVB, closed on Friday by the American authorities, had no choice but to sell part of its investments, which had lost value since their purchase. .
Unrealized loss
However, as long as the establishment decides not to sell, the discount remains virtual. This is then referred to as unrealized capital loss.
We estimate that the risk of materializing significant unrealized losses is generally contained for the banks that we rate, specifies S&P Global Ratings.
Still according to the agency, this risk is higher for the least diversified establishments, as was the case with SVB, which specializes in technology and private equity.
The American authorities announced on Sunday a series of measures to reassure individuals and businesses about the solidity of the American banking system and will in particular guarantee the withdrawal of all of SVB’s deposits.