European banks may withstand loss of 38% of deposits

Jefferies calculated that the median European bank could lose in theory 38% of its deposits before facing significant risk to capital due to losses on its HTM securities or the sale of other illiquid assets. — Bloomberg

MILAN: The average European bank could withstand a loss of 38% of its deposits without having to sell at a loss government bond holdings or have a fire sale of illiquid assets, Jefferies analysts say.

The collapse of Silicon Valley Bank after deposit withdrawals that forced the US regional lender to sell Treasury bonds at a loss has focused investors’ attention on the potential losses banks face on their government bond holdings.