Is the Saudi banking sector exposed to the SVB collapse? 
The recent announcement of the Silicon Valley Bank collapse has created unprecedented panic in global financial markets, especially when considering that the bank is a subsidiary of SVB Financial Group and is the 16th largest in the US. The bank assets valued at approximately $209 billion as of December 2022.
The collapse of SVB has created tension among US and international banks since it was the second largest bank that collapsed and closed its doors after the failure of Washington Mutual in 2008.
Financial experts attributed the bank’s failure to several reasons, among which was the mismatch between the bank’s assets and liabilities. This is evidenced by SVB’s massive growth between 2019 and 2022, which resulted in it holding a significant amount of Treasury bonds and other long-term debt instruments in assets while keeping small amount of deposits that were held in cash.
The same experts believe that the failure of SVB is incurable and will portend a devastating global financial crisis much worse than the one that occurred in 2008. As such, it will be difficult to overcome it, especially when considering the high inflation and interest rates globally.
On the contrary, other financial experts believe that the collapse of SVB is under control, since, in the aftermath of the collapse, federal regulators promised to make all depositors whole, even for those funds that the Federal Deposit Insurance Corporation did not protect.
The collapse of SVB has created tension among US and international banks since it was the second largest bank that collapsed and closed its doors after the failure of Washington Mutual in 2008.
It is believed that the Federal Reserve has taken the necessary steps following the collapse of SVB to improve confidence in the banking system and prevent future banking failures, including through its Bank Term Funding Program.
More importantly, US President Biden in a statement assured the American people that deposits would still be available after the collapse of two major institutions (SVB and Signature Bank) and insisted that taxpayers would not bear the cost of any bailout. He declared that the government was responding decisively to the collapse in a way that would protect depositors without rewarding risk-taking executives and investors.
The question that may be raised in one’s mind is whether the Saudi banking system was affected negatively in any way by the collapse and the failure of SVB.
In a recent televised interview, Ayman Al-Sayari, governor of the Saudi Central Bank (SAMA), stated that Saudi banks do not have any exposure to the US banks that recently collapsed. He indicated that the Saudi banking sector enjoys reassuring capital strength and adequate liquidity to continue providing financing services.
• Talat Zaki Hafiz is an economist and financial analyst. Twitter: @TalatHafiz
