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News > Italy

Failure of Major US Lender Sends European Stocks Into Retreat

  • A branch of Silicon Valley Bank in the U.S.

    A branch of Silicon Valley Bank in the U.S. | Photo: Twitter/ @timmins316

Published 14 March 2023

At least US$311 billion of value were lost on European stock exchanges in trading on Monday.

On Monday, stock exchanges across Europe were on their heels as investors worried that last week's collapse of U.S.-based Silicon Valley Bank (SVB) could portend similar problems among Italy's financial institutions.


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European financial markets responded negatively across the board on Monday, with the DAX blue-chip index on the Frankfurt Stock Exchange ending the day down 3.04 percent, while Paris' CAC-40 index was down 2.9 percent, the IBEX-35 in Madrid retreated 3.5 percent, and the AEX blue-chip index in Amsterdam slipped 2.1 percent.

But the biggest downturn was on the Italian Stock Exchange in Milan, where shares slid more than 4 percent in heavy trading. Italian banks were among the biggest losers of the day, with financial services giant Unicredit shedding 9 percent of its value, BPER Banca 9.5 percent, and Banca Mediolanum 7.8 percent.

According to media estimates, US$311 billion of value were lost on European stock exchanges in trading on Monday. Because of relatively high levels of under-performing loans and high debt combined with an economy that generally under-performs that of the European Union (EU) in general, Italy's banking system is generally regarded as among the most vulnerable in the EU.

"There's a saying that if the global banking system has a cold, Italy's banking system gets influenza because it has certain vulnerabilities," said Javier Noriega, chief economist with the Milan-based investment bank Hildebrandt and Ferrar.

"Stock prices are often about perception and the perception is that the Italian banking system may be less resilient" than those in other countries, he added.

The failure of the California-based SVB on Friday has sent ripples through the global financial systems. The bank was the largest lender in Silicon Valley, the high-tech hotbed of California and had been a frequent underwriter for technology startups.

SVB began struggling financially last year and then last week there was a run on deposits after the bank reported huge losses from securities sales, forcing it to close its doors.

It immediately went into receivership, and U.S. President Joe Biden vowed that all deposits in the bank were guaranteed and would be immediately available to the bank's clients. Biden also vowed to hold those responsible for the bank's failure "fully accountable."

However, that did not reduce jitters among investors. In Italy, the country's largest newspaper, Corriere della Sera, asked in a bold headline "Could a crash like the one from Silicon Valley Bank happen in Italy?"

Finance Minister Giancarlo Giorgetti tried to reassure investors. On Monday, he was "closely following" developments related to the California bank, while assuring Italian investors that there were no risks of a similar fate for the country's banks.

"We appreciate the rapidity with which the U.S. authorities intervened and we are confident that, if necessary, the European authorities will intervene with the same rapidity, assessing the implications for ... monetary policy and for financial stability," Giorgetti said.

Other Italian officials called on the European Central Bank to help shore up the health of European banks if needed.

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