EU Lawmaker: Prevent Panic Spread After SVB Collapse

• EU Lawmaker Markus Ferber called for a review of interest rate and sovereign bond exposures after the collapse of Silicon Valley Bank.
• Regulators should seek to stop panic from spreading, Ferber said.
• EU policy makers have sought to downplay fears of contagion, with a European Commission spokesperson saying SVB had only a “very limited presence” in the bloc.

SVB Collapse Sparks Concerns

The collapse of Silicon Valley Bank (SVB) has sparked concerns among European Union lawmakers, who are calling for a review into interest rate and sovereign bond exposures. German lawmaker Markus Ferber was particularly vocal on the issue, urging regulators to take action in order to prevent panic from spreading throughout Europe.

EU Policy Makers Downplay Fears

In response to these concerns, European Commission spokesperson stated that SVB had only a “very limited presence” within the bloc. French Finance Minister Bruno Le Maire also echoed this sentiment, claiming that banks in France were not exposed, due to their different business models compared to SVB’s.

Fears Over Interest Rate Shocks

Ferber warned that EU bank supervisors should check if European lenders could be vulnerable to interest rate shocks similar to those that felled SVB on Friday. He also urged a rethink on how sovereign bonds are treated under bank-capital rules – an issue which has been heavily discussed by German politicians who claim current rules do not properly account for risk associated with indebted governments such as Italy or Greece.

Containment is Key

Ferber emphasized the importance of containing any potential panic caused by SVB’s collapse: “The name of the game is containment now,” he said in an emailed statement.”Panic is infectious and must not be allowed to spread.”

Regulatory Action Needed?

While EU policy makers have sought to downplay fears of contagion in relation to SVB’s collapse, it appears clear that some form of regulatory action may be needed in order for Europe’s banking system remain stable going forward.