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By Alma DIZDAREVIC, Manager in Risk Management, HACA Partners S.à r.l.
The recent failure of Silicon Valley Bank (SVB) unexpectedly put on spotlight the negative developments and unfolding risks of financial instruments with hidden losses, specifically bonds.
Hidden losses or unrealized losses in bonds were not a root cause nor reason for banks’ trouble, but ultimately, they gave the final kick to bank`s collapse. Even though the regulatory framework for banks between USA and Europe have crucial differences, making SVB scenario highly unlikely to fully replicate in Europe, markets in EU can also face hidden losses being materialized when a crisis hits. Dynamic changes in terms of monetary policies, anticipated levels of interest rate and...
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