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Transcript – Anna Bligh interview with Sky News’ Andrew Clennell on SVB closure

13 March 2023

ANDREW CLENNELL: Much of the commentary around the fall of Silicon Valley Bank is talking down comparisons to the Lehman Brothers collapse in 2008, which was one of the major factors behind the global financial crisis. To get a sense of the implications for Australia and Australian banks, I spoke a short time ago to Anna Bligh, the chief executive of the Australian Banking Association and I began by asking whether she agreed that the collapse of Silicon Valley Bank was not a case of Lehman Brothers 2.0.

ANNA BLIGH: Absolutely. What is underpinning this bank failure is a number of things, but not least of all, it’s a very niche bank with high exposure to one part of the economy. And that’s the part of the economy that’s been quite volatile and troubled. And that’s the technology sector. Lehman’s had their problem originated in their mortgage book in the core business of a very large banking book. And if you look at the difference, in contrast, Australia’s banks, whether they’re large or small, do not have that kind of single exposure into any particular part of the economy. They’re very diversified and they’re very well placed to manage if one part of one sector of the economy has a wobble. They’ve got a very diversified book to manage that risk.

“What is underpinning this bank failure is a number of things, but not least of all, it’s a very niche bank with high exposure to one part of the economy. And that’s the part of the economy that’s been quite volatile and troubled”

Anna Bligh, ABA CEO

ANDREW CLENNELL: And what if anything, is going to be the effect on Australian banks out of this collapse?

ANNA BLIGH: Well, as you may have heard the Treasurer say yesterday, it does look as if there might be some Australian companies that had money involved with the Silicon Valley Bank. I’m not sure whether that is as equity investors or as depositors, but we have already heard that the US authorities will make sure that depositors in Silicon Valley Bank, that any losses will be recovered. So at this stage, we’re not expecting any significant contagion into the Australian banking system. Obviously, everybody’s monitoring very carefully. But it is important for Australians to stay calm and remember that we have some of the best capitalised banks in the world. Our regulatory framework is in many respects, much tighter than that in the US, for example, again, whether you’re large or small in Australia, you are required to have certain or to meet certain liquidity requirements in order to hold your banking licence. In the US, smaller banks like the Silicon Valley Bank [are] not subject to liquidity requirements. So Australia’s banking system is very well protected, and very well regulated. Obviously, everybody will watch the markets globally for the next couple of days. Something of this size is not to be dismissed easily, but right now, there’s a lot of confidence that Australia’s banks will be fine.

ANDREW CLENNELL: What, if anything, does this collapse, say about where the US economy is at now?

ANNA BLIGH: Well, good question. I think the other thing to remember is that there are a lot of differences between Australia’s banking system in the US, not least of which is that the US has thousands of very small banks that might only bank the community in which they’re located. So there’s actually been at 561 banking failures in the US since 2001. In Australia, there’s not been one failure, whether it was GFC, or anything else. So what we know is that in the US it’s not an unusual thing for smaller banks to fail and the US authorities have a lot of practice and a lot of experience in resolving those failures and protecting customers. But probably it tells us a little bit more about what’s happening in the tech sector in the US. And that obviously has global implications. The Silicon Valley tech sector out of the United States has not only been a really important part of the US economy, it’s driven a lot of innovation across the world. So that’s one of the reasons I think that the authorities in the US have been so keen to ensure that those start-ups and fin-techs that were funded by this bank are not going to see serious losses because they want that innovation and those companies to continue.

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