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They are preparing for the European consequences of the banking crisis

Investors have been quick to divest themselves of euro zone bank stocks and are less likely to expect the European Central Bank to adopt a strict rate-hike path after the Silicon Valley Bank has been on the rise since the 2008 global financial crisis. produced the largest US bank failure.

But a senior European Central Bank supervisor said eurozone banks were well-funded and had more conservative capital deployment policies than SVB, which lent mainly to technology startups. But the same is true of New York-based rival Signature Bank, which was liquidated over the weekend, reported the Reuters.

According to the source of the news agency, the European supervisors do not see that the collapse of the SVB would have a direct impact on the banks of the euro area. The risks are still constantly being weighed, because the situation could change quickly if losses in the United States spread to larger banks, which would increase the risk of contagion.

So far, however, the ECB’s supervisory board, which oversees the eurozone’s largest bank, has not seen the need to hold an extraordinary meeting.

Among the national authorities responsible for smaller banks, only the German Bundesbank officially convened its crisis team, as we reported. The German financial supervisory authority, BaFin, announced that it would order a moratorium on SVB’s branch in Germany.

Meanwhile, in France, a spokesperson for the Banque de France said no crisis consultations were underway.

Italy’s finance ministry said it was confident European authorities would intervene “with the same speed” as their American counterparts if needed. For now, however, they do not expect collapses there either.

The interest rate hike may backfire

Still, investors were worried and even questioned the ECB’s clearly predicted 50 basis point interest rate hike for Thursday.

Financial markets are now betting on a 60% chance that the ECB will raise interest rates by just 25 basis points, reflecting concerns that market instability could get in the way of the central bank’s fight against inflation.

Against the more restrained tightening path, the banks of the eurozone did a good job of reallocating assets to their “held-to-maturity” portfolios on their books, which means that they did not have to count on lower market prices due to rising interest rates.

Marco Troiano, director of Scope Ratings, noted that eurozone supervisors apply the strictest liquidity requirements to banks with assets worth more than 30 billion euros, while their American counterparts set the threshold at $250 billion.

Silicon Valley Bank, which suffered a bankruptcy last week, had about $209 billion in assets.

But there is one key difference: the United States has a single deposit insurance system, which was activated on Monday to rescue SVB customers, while each of the 20 countries that use the euro has its own, and its capacity is ultimately limited by the ability of individual national governments to rescue depositors.

Analysts at Morgan Stanley estimate that euro zone banks will not be forced to sell their bonds at a loss thanks to their existing cash buffer.

Cover image: Getty Images.