China’s central bank warns SVB failure shows impact of rapid global rate hikes

According to a senior official at the People’s Bank of China, Silicon Valley Bank’s (SVB) failure demonstrated how quickly changing monetary policy could have unexpected effects.

Xuan Changneng, a deputy governor at the People’s Bank of China, stated at the Global Asset Management Forum in Beijing that some financial institutions had lost their sensitivity to short-term and significant changes in interest rates because they had grown accustomed to managing their balance sheets in an environment of low-interest rate volatility.

According to him, Silicon Valley Bank‘s balance sheet characteristics made it more vulnerable to changes in interest rates, which ultimately increased risk.

According to the current state of affairs, “it is still unclear whether inflation in the major developed economies will fall significantly in the short term, and continuing to maintain relatively high interest rates may also have a negative impact on the steady operations of the banking and financial system,” he said.

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