Europe's corporate treasurers on alert over SVB fallout

Credit Suisse bank's office building, in Zurich
A view shows a signage of Swiss bank Credit Suisse in front of an office building in Zurich, Switzerland March 16, 2023. REUTERS/Denis Balibouse

FRANKFURT, March 16 (Reuters) - European corporate treasurers were on alert on Thursday, with a German industry association warning against complacency and major companies saying they were closely monitoring developments in the global banking system.

German corporate treasurers were urged by an industry association not to "underestimate the current situation", after Switzerland's second-biggest bank Credit Suisse sought to shore up its liquidity and restore investor confidence by borrowing up to $54 billion from the Swiss National Bank.

The blog post from the Association of German Treasurers, entitled "SVB collapse not without consequences for treasurers", asked whether this event was a "Lehman 2.0" moment.

Policymakers have stressed that the situation following the demise of Silicon Valley Bank (SVB) is different to the global financial crisis sparked by the collapse of Lehman Brothers more than a decade ago as banks are now better capitalised and funds, which dried up almost overnight in 2008, more easily available.

Allianz, one of Europe's biggest financial firms, said that authorities were "well equipped" to deal with any liquidity crisis, unlike during" the global financial crisis.

But Carsten Linker, head of the German treasurers association's risk management department, said: "The speed and scope of such crisis developments in the capital market are always remarkable."

"Increased attention to potential consequential or amplifying effects is also a must," Linker was quoted as saying, referring to the interconnectedness of markets that could quickly trigger further problems in Europe.

Hapag-Lloyd (HLAG.DE), the German container shipping group, said it was "observing the situation very closely", with a similar comment from German chemicals maker BASF (BASFn.DE).

"Globalization is wonderful, but it also opens avenues of contagion. And we simply don't know yet the degree to which the fallout can hit European banks," said Utz Greiner, a partner at Vienna-based treasurer consultants Schwabe, Ley & Greiner.

"I would expect corporates to take precautionary measures," he said, suggesting they move cash deposits into money markets.

He also advised diversifying banks and organising new undrawn credit lines, although added both can take months.

Greiner estimated that only 20-30% of German small-cap companies were fully equipped with best corporate treasury practices for moments of market stress.

The post from the German treasurers association said that the country's capital and banking markets faced only "moderate" impacts from turbulence in the wake of SVB's collapse.

"Nevertheless, treasurers should not underestimate the current situation, even if they themselves are not directly or indirectly affected," it wrote.

Reporting by Tom Sims, Marta Orosz, and Patricia Weiss; Editing by Paul Carrel, Friederike Heine and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Covers German finance with a focus on big banks, insurance companies, regulation and financial crime, previous experience at the Wall Street Journal and New York Times in Europe and Asia.

Thomson Reuters

Senior power correspondent for Germany with more than 30 years experience and focused on deregulated energy markets for power and gas, companies, networks, exchanges, renewables, policy, storage, future transport and hydrogen. A German native who has studied and worked in the United States and Britain.