Collapse of SVB in US unlikely to affect local banks, says Finance Ministry

KUALA LUMPUR: The collapse of Silicon Valley Bank (SVB) in the United States is unlikely to have a contagion effect on the banking sector here said Datuk Seri Ahmad Maslan.

The Deputy Finance Minister said the government is of the view that it will not spread here.

"We have several measures in place such as the Basel 3 cash liquidity model.

"It is the gold standard for international banks to follow and is adopted by local banks.

"There are some banks in the United States and Europe that do not follow this but our banks do," he said when replying to a supplementary question raised by Datuk Dr Shuhaili Abdul Rahman (PN-Labuan) in Parliament on Tuesday. (March 21).

Basel 3 are internationally agreed banking supervision measures to strengthen the regulation, supervision and risk management of banks.

Ahmad added that SVB ran into trouble due to a 425 base points rise in overnight policy rates (OPR) in the United States to 6.5% recently, compared to only 100 base points in the OPR here.

He said the hike in the OPR in the United States resulted in a bank run, mainly by start-ups and fintech companies, which affected SVB.

The collapse of SVB on March 9 was followed by the meltdown in shares of Swiss investment bank Credit Suisse.

Ahmad also said that the impact of Credit Suisse is unlikely to spread here.

Earlier, Ahmad informed the House that the Monetary Policy Committee (MPC) would closely monitor the lag effect of raising the OPR rise four times last year.

He said that the MPC decided not to raise the OPR early this month to maintain it at 2.75%, which represented a 100 base point rise from the 1.75% during the Covid-19 pandemic in 2020.

He said the hike in the OPR last year helped stave off a rise in inflation in the country which was at 3.3% in 2022.

Based on the latest data, Ahmad said that the inflation in January this year was below 3.4%, which was lower than in most developed countries.