Silicon Valley Bank: will the bankruptcy of the US bank have an impact on Peru?

the fall of Silicon Valley Bank (SVB) had its origin in a bet on the part of the entity, which was affected by the rapid rise in interest rates made by the Federal Reserve (Fed) to contain inflation, according to the EFE Agency. The bank has invested billions of dollars in long-term bonds in recent years, taking advantage of low prices, a gamble that was complicated by rising interest rates.which caused the price of those public debt products to fall.

The SVB had to sell a significant amount of bonds with losses in the second week of March to obtain liquidity with which to meet the withdrawals of its clients, who are mostly companies in the technology sector. The SVB’s move scared the markets and customers, who went to withdraw their money. The panic spread and on Sunday, March 12, it had also taken the SignatureBank (New York), which in recent years had made a significant commitment to the cryptocurrency sector.

The fall of both banks in such a short time has generated mistrust in the US financial system. For this reason, we spoke with César Romero, head of research at Renta4 SAB, to find out if there would be any impact in Latin America and Peru.

“The possible effect that it could have is quite minor, basically it is the issue of uncertainty and expectations of what can happen. On average, banks maintain around 50% in loans to corporations and large companies, which are the least affected, at least of the four major banks in Peru, while maintaining an average of 5% only for micro-enterprises that could be startups”Romero specified.

The specialist pointed out that the effect that the bankruptcy of startups or greater withdrawals of money could have would remain in USAbut that the responses by the Federal Reserve in support signal are controlling the impact.

“The averages have been fast and, overall, what it has generated is a possibility that the rate hike will not be as strong as previously estimated, which could bring some relief to the market,” Romero concluded.