Commerce body urges Thai authorities to keep an eye on US economy after bank closures

One of the two banks, Silvergate Capital (Silvergate), a central lender to the crypto industry, has disclosed plans to wind down operations and voluntarily liquidate on Wednesday (March 8).

Meanwhile, Silicon Valley Bank (SVB), the largest bank by deposits in Silicon Valley, was closed on Friday (March 10) after facing a sudden bank run, precipitating a capital crisis.

The closure of Silvergate and SVB has triggered volatility in the global capital markets and raised concerns about the US economy.

The collapse of SVB is considered the second-largest bank failure in US history since Lehman Brothers was closed on September 15, 2008, during the subprime mortgage crisis.

The 2008 crisis was triggered by a large decline in US home prices after the collapse of a housing bubble, leading to mortgage delinquencies, foreclosures, and the devaluation of housing-related securities.

Chamber chairman Sanan Angubolkul said on Monday that the closure of SVB affected startups, as they are the bank's main customers.

"Large startups deposited cash in SVB, while the bank granted loans to help them with business expansion," he explained.

He claimed that the closure of SVB was due to the US Federal Reserve's interest rate hikes, which led to the bank losing liquidity as customers withdrew their cash.

"The closure has affected customers' confidence in the banking system," he said.

He said the closure would not affect Thailand for now, as the US Fed is dealing with this issue, while the US’ financial standing is still strong.

"This is another sign of the vulnerability of the US economy," he said, adding that the issue needed to be monitored closely.

He advised the Finance Ministry and the BOT to be aware of this issue as US economic policies always affect the global economy, including Thailand.

Meanwhile, the government confirmed that the closure of two US banks would not affect Thailand.

"Prime Minister Prayut Chan-o-cha has ordered the economic team to monitor developments and evaluate their impact on the Thai economy," deputy government spokeswoman Traisulee Taisaranakul said.

She said no Thai banks or financial institutions had engaged in transactions with Silvergate and SVB. She does not expect the closure of the two banks to affect the US economy as those banks provide services to specific groups, while the US government is dealing with this issue.

She confirmed that the BOT had implemented measures to maintain the stability of Thailand's financial system since the Asian financial crisis of 1997. The "Tom Yam Kung" crisis began in Thailand in July 1997 before spreading to several other countries, raising fears of a worldwide economic meltdown due to financial contagion.

"Thai state and commercial banks have supported the country's economy over the past 20 years despite various global financial crises, including the Covid-19 pandemic," she said.

Citing BOT data last year, she said Thai commercial banks have high financial status, including a capital adequacy (BIS) ratio of 19.4%, liquidity coverage ratio of 197.3%, low non-performing loans (NPL) of 2.73% and NPL coverage ratio of 171.9%.

Thailand also has a Deposit Protection Agency that can provide deposit insurance to more than 98% of depositors in the country, she added.

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