The collapse of Silicon Valley Bank has vindicated the Australian Prudential Regulation Authority’s tougher rules and refusal to give into bank lobbying to loosen capital and liquidity requirements, experts say.
Banks originally opposed the higher equity capital, which reduces shareholder returns, but ultimately accepted the change.
Chris Barter, co-founder of King River Capital, which has offices in Sydney, Denver and New York, said some of its portfolio companies had exposure to SVB, but almost all of their deposits were withdrawn by Friday before SVB collapsed. Firstly, APRA runs stricter liquidity rules that require all banks to hold surplus funds in Commonwealth and state government bonds and central bank deposits, which can be quickly converted into cash in the event of a 30-day bank run by depositors.
They typically hedge against the movement in interest rates and bond prices, whereas SVB was exposed to swings in financial markets. Mr Peterson also said the SVB case study should make local regulators cautious about relaxing capital and liquidity rules for smaller lenders. In a statement, the Australian Banking Association said: “The SVB case in the US has been brought about by a particular set of factors, including a high exposure to the tech industry.“Australia’s banks, in contrast, are strong and subject to a different set of regulatory frameworks.
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