China Orders Financial Reductions To Avoid Bank “Bombs” 

( China’s state-run Security Times said in an editorial on Wednesday that the collapse of Silicon Valley Bank in the US will have no impact on China’s financial system but does offer an important lesson for China’s banking industry, according to a report in Reuters. 

In the editorial, the state-run outlet claimed that a similar bank failure would be unlikely in China but could have “important implications” for China’s development of small- and medium-sized banks and the stability of its financial system. 

Last Friday’s collapse of Silicon Valley Bank roiled global markets, forcing President Biden to assure the country that the US financial system is “safe” as administration officials took emergency measures to protect depositors. 

Meanwhile, in China, shares of smaller lenders have underperformed its big banks in the last week over concerns about their ability to manage risks. Smaller Chinese banks are more vulnerable to interest rate risks, GF Securities reported this week, making them more likely to suffer from investment losses during a high-interest cycle and from shrinking interest spreads, according to Reuters. 

In its editorial, the Security Times said the collapse of Silicon Valley Bank was a reflection of loosened regulations in the United States. But in China, financial regulatory reforms implemented over recent years have curbed shadow banking, reduced financial risk, and cleaned up the banking industry, the editorial claimed. 

The editorial also boasted that China continues to close regulatory loopholes, including a move last week setting up a new financial regulatory body that will consolidate oversight of the financial industry. 

According to the Security Times editorial, while the Silicon Valley Bank collapse will have no “material impact” on the Chinese financial markets, its financial industry must “learn from this lesson” by prioritizing control and risk prevention. 

On Saturday, Silicon Valley Bank’s China joint venture sought to quell fears among its investors and clients, saying it maintains a solid corporate structure and a balance sheet that is independently operated, Reuters reported.