No Local Bank Affected by Silicon Valley, Silvergate, Signature Bank Collapse—BSP

• The Bangko Sentral ng Pilipinas (BSP) and the Bankers Association of the Philippines (BAP) reassured the public that the recent collapse of three US-based banks, Silicon Valley Bank, Silvergate Capital Corporation, and Signature Bank, has not had a substantial impact on the Philippine banking sector.
• Philippine banks have no reported exposure to the said banks’ mishaps as their Foreign Currency Deposit Unit (FCDU) assets are mostly loans, Republic of the Philippines dollar bonds, and sovereign bonds of countries with high credit ratings, according to BSP Governor Felipe Medalla.
• The BAP emphasized that the BSP’s prudential measures have enabled the Philippine banking system to withstand economic shocks, citing diversified deposit bases, capital, and liquidity ratios that exceed BSP requirements.

The collapse of three U.S.-based banks, Silicon Valley Bank, Silvergate Capital Corporation, and Signature Bank, has had no substantial or material impact on the Philippine banking sector, the Bangko Sentral ng Pilipinas (BSP) and the Bankers Association of the Philippines (BAP) have assured the public.

Bangko Sentral ng Pilipinas statement on US bank collapse

According to BSP Governor Felipe Medalla, Philippine banks have no reported exposure to the abovementioned mishaps because “banks’ FCDU assets are mostly loans, Republic of the Philippines dollar bonds, and sovereign bonds of countries with high credit ratings.”

Foreign Currency Deposit Unit (FCDA) refers to a unit of a local bank/branch of a foreign bank authorized by the BSP to engage in foreign-currency-denominated transactions, pursuant to Republic Act No. 6426 (the Foreign Currency Deposit Act of the Philippines), as amended.

Statement from Bankers Association of the Philippines

Meanwhile, the BAP emphasized that the  prudential measures implemented by the BSP have provided the necessary support that allows the Philippine banking system to withstand economic shocks:

“Banks have diversified deposit bases that include all sectors of the Philippine economy, allowing them to continuously provide the liquidity needs of their clients. Additionally, banks in the Philippines continue to have capital and liquidity ratios that exceed the requirements set by the BSP.”

What happened to Silvergate Capital?

On March 8, Silvergate Capital, a subsidiary of Silvergate Bank, a traditional bank lending to cryptocurrency firms, announced that it will “voluntarily liquidate” its assets and wind down operations to mitigate the recursions of the recent turmoil in the crypto industry.

The firm recently laid off around 40% of its workforce. Silvergate even has $1 billion dollar net loss in the fourth quarter of 2022, which led the firm to go to he Federal Home Loan Bank for an additional $4.3 billion loan. 

https://bitpinas.com/business/silvergate-bank-latest-victim-crypto/

What happened to Silicon Valley Bank?

Then on March 10, Silicon Valley Bank collapsed, following a bank run and a capital crisis, which resulted in the second-largest failure of a financial institution in US history. The U.S. Federal Deposit Insurance Corporation (FDIC) was said to have taken control of the bank and liquidated the bank’s assets to pay back its customers, including depositors and creditors.

The collapse had made ‌Circle Internet Financial’s USDC stablecoin, the second-largest stablecoin with a market cap of $42 billion, to temporarily lose its peg to the U.S. dollar because some of USDC’s cash reserves were parked at Silicon Valley Bank.

https://bitpinas.com/cryptocurrency/news-bit-usdc-depegs-from-one-dollar-news-bit/

Silicon Valley’s collapse has led to another bank’s collapse, the Signature Bank. According to online publication The Wall Street Journal, like Silivon Valley, Signature Bank had a relatively large amount of uninsured deposits because of its business model catering to private companies. 

The U.S. FDIC also took control of the bank’s properties and handled the insurance process. As per the agency, it decided to close the bank to protect the U.S. economy and strengthen public confidence in the banking system.

It is not the first time that ‌local industry has been feared to have been affected by an international mishap. During the collapse of crypto exchange giant FTX last November, which affected millions of people, the BSP promptly asked local crypto exchanges and wallets if they were affected by the fiasco. Luckily, the exchanges clarified that they had no exposure to the FTX. 

https://bitpinas.com/regulation/bsp-asks-local-vasps-of-ftx-exposure-exchanges-respond/

“The BAP continues to work with the BSP and other stakeholders to pursue reforms that will lead to an even stronger financial system that sufficiently provides the financial needs of the banking public,” the BAP concluded. 

This article is published on BitPinas: No Local Bank Affected by Silicon Valley, Silvergate, Signature Bank Collapse—BSP

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