U.S banking crisis to have limited impact on banks in India, Asia

The impact of the Silicon Valley Bank and Signature Bank collapse in the U.S is likely to be limited as financial institutions in India as well as the Asia-Pacific, as per ratings agency Moody's.

"Most APAC institutions are not exposed to the failed US banks, and only a handful of institutions has immaterial exposures. Finally, most institutions are not as susceptible to large losses from debt security holdings as Silicon Valley Bank was," Moody's said.

The US-based rating agency said rated banks in APAC structurally have stable funding and ample liquidity and that they are mostly funded with customer deposits, while their market borrowings are modest at about 16% of their total assets on average.

Their business depositors are well diversified across different sectors, with no rated bank in the region being heavily exposed to technology companies. Also, APAC banks' deposits are generally not heavily concentrated on single clients.

The ratings agency also said Indian banks have faced strenuous challenges in the past decade, but their funding and liquidity have held up strongly and have been a key factor supporting their overall credit strength.

The Moody's report adds, "most institutions are not as susceptible to large losses from debt security holdings as Silicon Valley Bank was. The second order impact of the US bank failures is still developing and bear close watching."

On March 12, 2023, US regulators closed Signature Bank, just two days after shutting Silicon Valley Bank, following mass withdrawals of customer deposits.