European banks are not completely in the clear after the collapse of Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) even though they do not face a systemic risk, the president of German economic research group DIW said on Tuesday.
While there are many reasons to be less cautious, “I wouldn’t give the all-clear (in Europe), because the root cause of the woes of these two U.S. banks is the very rapid increase in interest rates, and that caught many people off-guard”, Marcel Fratzscher said.
Leverage in the United States is much higher than in Europe, said Fratzscher in regard to SVB’s extreme imbalance between short-term liabilities and long-term investments, which had lost value with the increase in interest rates.
Source : European Banks Still at Risk Following SVB Collapse, German Economist Warns