Moody’s fears SVB crisis will make funding more expensive for European banks

Credit rating agency Moody’s stresses that there is a critical difference between the European and North American banking systems, which will limit the impact on the Old Continent.

Moody’s believes that the Silicon Valley Bank crisis and recent rate hikes will increase stress on the US banking system, weakening investor confidence and likely making funding more expensive for European banks.

In a report published this Tuesday, the credit rating agency Moody’s explains that, when interest rates rise faster than expected, fixed income assets held by banks lose value and liabilities begin to appreciate a faster pace.

This mismatch affects almost all banks.

However, he observes, there is a critical difference between the European and North American banking systems, which will limit the impact on the Old Continent, since European banks have smaller titles on their balance sheets and a more stable deposit base. , which has been growing less rapidly.

Moody’s explains that although the debt securities of European banks grew 10% in 12 months between mid-2009 and June 2020, it was cash deposits in central banks that soared during the pandemic, in response to the TLTRO program (Targeted Longer -Term Refinancing Operations) of the European Central Bank.

“This has led to some structural differences between banks in the euro zone and the US”, underlines the agency.

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