Paris, France– The turbulence in the US banking sector following the collapse of Silicon Valley Bank (SVB) should have only a limited impact on European banks, which are organized differently, rating agencies Moody’s and S&P Global said on Tuesday.
Markets were rocked earlier this week by the collapse of two US regional lenders, SVB and Signature Bank, which forced authorities to launch measures aimed at preventing contagion across the sector.
Moody’s, which has downgraded the US banking sector’s outlook from stable to negative, said the structure of European banks limited their exposure because they placed a larger share of deposits with central banks.
The US-based agency added that debt securities were a smaller part of European banks’ balance sheets, compared with American institutions.
“A critical difference between the European and US systems, which will limit the impact across the Atlantic, is that European banks’ bond holdings are lower and their deposits more stable, having grown less rapidly,” it said.
It added that the Bank of England and the European Central Bank had developed better access to liquidity in the event of tensions.
S&P Global Ratings said the European banks it follows and rates did not have the same economic model or funding sources as the US banks, adding it was unlikely that their direct exposure was significant.
EU economy commissioner Paolo Gentiloni, French Finance Minister Bruno Le Maire and German Chancellor Olaf Scholz have been among the European figures reassuring markets about the continent’s exposure to the financial turmoil.
But Moody’s warned that interest rate tightening “likely still has some way to run” and “developing stresses in the US banking system will also weaken investor confidence and heighten funding tensions for European institutions”.