February 26, 2024

Nubank, C6, Inter, Neon, Agi, and Original are not exposed to SVB; Actions taken in the US are reassuring FGC experts

Developments surrounding the bankruptcy of Silicon Valley Bank (SVB) have raised doubts about the potential impact of the case on the operations of Brazilian digital banks. Experts consult them InfomoneyHowever, do not believe in the possibility of transmission and reassure checking account holders.

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So far, Nubank, C6, Inter, Agibank, Original, PagBank and Neon have informed and confirmed the market Infomoney They have no exposure to the US bank which is known for financing startups and was shut down by the US authorities last Friday (10).

Some digital banks were emphatic. C6, for example, stated that it had no relationship with the corporation, as well as Banco Inter – noting that its subsidiaries never maintained exposure or a business relationship with SVB.

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Acibank, in turn, said it had no dealings with any international bank. In a note, he said, “The institution strengthens its rigidity and adopts best practices in managing assets and liabilities to ensure security for all its customers.”

In a statement to clients, Nubank stated that resources “remain very secure” in the bank, which is not exposed to SVB — whether deposited, invested or borrowed.

Also on a note, Neon Bank says it is not exposed to SVB and adds that all deposits made at the institution are guaranteed by the FGC (Credit Guarantee Fund) or any regulatory obligation required by the central bank.

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In a similar vein, PagBank reports that neither the company nor any of its affiliates are exposed to Silicon Valley Bank.

The Brazilian Federation of Banks (FIBRABAN) has also been consulted before Infomoneybut she hasn’t returned yet.

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understand the situation

Jorge Azevedo, author of the book How to create a startup An angel investor in more than 400 companies explains that the problem with SVB occurred because the bank’s treasury took very risky positions, ignoring practices that mitigate potential risks.

He claims that the bank had a large volume of deposits in 2021, and without many investment options, it allocated about $80 billion in MBS Securities – a 10-year real estate fund – yielding 1.56% per annum.

But in recent months, the Federal Reserve has raised interest rates in the United States to the current level, in the range of 4.50% and 4.75% annually, which has reduced the attractiveness of investment in MBS by the bank, he adds.

“The bank’s treasury sold $21 billion of that position – with a loss of $1.8 billion – and the market took notice, and started rushing to withdraw deposits at the institution,” he explains. The movement worsened SVB’s liquidity situation until its closure by US regulators, announced last Friday (10).

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Are there risks?

“I agree that such information generates rumours, creates a herd effect and can constitute a systemic crisis, like the one of 2008,” says Pedro Posap, a financial advisor and real estate planner. “The SVB issue could have something to do with, yes, digital banks, but I think it won’t extend to them given the actions that have already been taken.”

The expert is mainly referring to the emergency program promised by the Federal Reserve (Fed, Central Bank of America) to try to contain the effects of the collapse of the SVB bank. The corporation said in a statement that it is ready to deal with any liquidity pressures that may arise.

SVB clients feared they would not be able to move the money stored in the bank, but on Sunday (12) the US government guaranteed they had access to funds for all deposits made at the bank as of Monday (13) — not just the amounts covered by the Federal Deposit Insurance Corporation (FDIC). FDIC), equivalent to the American Credit Guarantee Fund (FGC).

Over the weekend, US President Joe Biden has already instructed the Treasury Department and the National Economic Council to work with bank regulators to address problems at SVB and Signature Bank — another bank that also closed on Sunday. (12) The domino effect.

In addition to the measures announced by the US authorities, angel investor Jorge Azevedo claims that the status of Brazilian digital banks reduces any risks of contagion for the sector here in the country.

It also highlights – especially for the most anxious account holders – that even in the event of a problem, FGC will guarantee up to R$250,000 per CPF deposited to financial institutions in Brazil.

“The situation of financial institutions in recent days will be enough to reassure customers of digital banks in Brazil,” says the expert.

In the view of Luciano Ferris, an economist and CFO of investment advisory firm Somus Capital, the potential impact of higher Brazilian interest rates on Brazilian digital banks is such that high rates reach SVB.

He notes that “Brazil and the digital banking sector have already been adapted to operate at high interest rates for a long time.” “That kind of problem won’t happen here because the banks’ corporate models are done in much messier scenarios,” he adds.

At this time, Ferris considers it important for the customer to verify the digital bank relationship in which they have an account with SVB.

Gabe Diamant, CEO of BridgeWise, an Israeli startup that recently arrived in Brazil and works in the field of financial research by applying advanced artificial intelligence techniques, also reinforces confidence in the solidity of the Brazilian financial system and in the country’s digital banks.

“The important technology companies in Brazil that are exposed to SVB will need to find a solution after the bank goes bankrupt,” he explains. “But none of the big digital banks in Brazil, at the moment, are in danger of going bust,” points out Gabi, who is based on reports from the startup.

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The second layer of security

Despite the numbers of billionaires in the case, Bussab claims that the US authorities have room to solve the problem and ensure the stability of the domestic – and therefore the global – financial system.

However, for customers of Brazilian digital banks who want to further secure themselves, the Wealth Scheme proposes an additional layer of protection in the resources held in institutions.

“Out of concern, in the short term, account holders can leave resources of up to R$250,000 invested in CDBs,” the expert suggests, referring to the FGC guarantee limit.

Funds invested in CDB banks, LCIs, LCAs and savings assets are covered by the FGC. Nubank states on its website that funds applied to its digital account and directed by customers to RDBs (bank deposit receipts) are covered by the FGC. As for who chooses to invest in public securities, no. However, since it is a paying account, all funds invested in public securities are segregated from the bank’s assets, which prevents losses in the event of a problem with the bank.