The week in markets - Banking sector turbulence

The epicenter of the banking sector storm, Silicon Valley Bank, was taken over last night by another bank named First Citizens BancShares. Still, the collapse of Silicon Valley Bank is a reminder that only the large American banks are subject to regular stress tests and tight regulations. But small banks have no less than $2 trillion of commercial real estate loans, or 44% of their total loan book. Our head of fixed income research Markus Allenspach is not sure all the instruments necessary to prevent another problem are in place, for example a deposit guarantee like the Retail Deposit Guarantee Scheme that ran between October 2008 and October 2010. The Dodd Frank Act of 2010 rules it out, and Treasury Secretary Janet Yellen said she’s not ready to change the law. Instead they’ll only support banks that are in receivership. To reiterate, this is not a big bank problem.

In this episode, Mark Matthews Head Research Asia at Julius Baer shares perspective on the banking sector, and its outlook for markets.