Important Differences Between European Banks and SVB

We do not believe investors should view the collapse of U.S.-based Silicon Valley Bank as a read-through of the health of European banks' balance sheets. Nevertheless, banks remain highly reliant on the confidence of depositors and other funders. It would be foolish to say there is no contagion risk for European banks, especially if other global banks run into trouble. The current uncertainty could also push up the cost of funding and increase the rate at which European banks pass on higher interest rates to depositors. But we believe it is vital for investors to take note of the contrasts between European banks' and SVB's balance sheets.