SVB and Credit Suisse crisis

What it is about

Juan Carlos Estepa Jiménez analyzed at the First Breakfast Conference (May 2023) the crises of Silicon Valley Bank (SVB) and Credit Suisse through their figures: balance sheet, capital ratios, profitability and the reaction of bank shares.

The 16-slide presentation shows how SVB more than doubled its assets and deposits between 2020 and 2022 while the Fed raised rates, and how long Credit Suisse's deterioration had been under way. It closes with the fall in share prices of US, Spanish and global systemically important banks up to March 24, 2023.

Objectives

• Review the evolution of SVB's balance sheet and regulatory ratios before its collapse.
• Contrast the Credit Suisse case, whose deterioration had been building for years.
• Measure contagion to other banks through the change in their share prices.

Key takeaways

1. SVB met its regulatory ratios at the end of 2022 (CET1 of 15.3% against a requirement of 7%); the problem was the unrealized losses in its asset and liability management after seven Fed rate hikes.
2. Between 2020 and 2022 SVB's assets grew 2.5 times and its deposits 2.47 times.
3. A Fed vice chair called the case "a textbook case of bad management", and supervisors had identified much of the problem in 2021 and 2022.
4. Credit Suisse went from a profit of 2,669 million Swiss francs in 2020 to losses of 7,293 million in 2022, with an ROE of -16.1%.
5. Between March 7 and 24, 2023, Credit Suisse lost 71.6% of its market value; most of the systemic banks analyzed fell between 7% and 29%.