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US banking failures hold silver lining for Bermuda

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Jody Feldman, left, of Butterfield Bank, and Louise Twiss West, of HSBC, spoke during a Bermuda Captive Conference panel discussion about banking and the future (Photograph by Jessie Moniz Hardy)

Since an American crisis in March when three banks failed over the course of five days and $42 billion was withdrawn in 24 hours, depositors have been much more curious about what goes on behind the closed doors of their financial institutions.

That spells good news for Bermuda, according to panellists at the Bermuda Captive Conference at Hamilton Princess & Beach Club.

“Clients are more interested in knowing and understanding what actually lies beneath different banks holdings,” HSBC head of wholesale banking Louise Twiss West said.

“We are seeing a bit more inquisition and review there and for Bermuda that is actually positive. We have strong regulation; we have a well capitalised framework; and we have a good, diverse industry base.”

Bermuda banks can show that all of the factors that one would want to see are there, Ms West said on Tuesday in the panel Banking on the Future: Navigating Macro Issues in the Captive Arena.

“That is quite a positive for the industry,” she said.

Ms West said another upside for HSBC globally was that they had acquired Silicon Valley Bank’s United Kingdom subsidiary.

“Then in June we announced that as part of that and our existing technology business, we created HSBC Innovation Bank – a stand-alone subsidiary bank with a location in the United States, the UK, Israel and Hong Kong. We will be supporting that tech sector and life sciences sector and bringing together some of our innovation capabilities.”

Shivani Seth, left, moderator of the Banking on the Future: Navigating Macro Issues in the Captive Arena panel in the Bermuda Captive Conference and speakers Louise Twiss West of HSBC, and Jody Feldman of Butterfield Bank (Photograph by Jessie Moniz Hardy

Butterfield’s Jody Feldman, senior vice-president head of corporate banking, called the Silicon Valley Bank collapse in California “pretty scary”.

“It raised contagion and systemic concerns across the markets,” Mr Feldman said.

“When that fear hits, it is very hard to contain a crisis of confidence in banks.”

He said at the time of the crisis it was important for local banks to have frequent conversations with stakeholders to show how they were different.

“Stock prices across the bank were hit pretty hard but a lot of that has come back since March,” he said.

Panel moderator Shivani Seth, The Royal Gazette business podcaster, asked Mr Feldman if he was content with the systems his firm had in place after the crisis from a regulatory point of view.

“Did you have to revise or renew them?” Ms Seth asked.

“We are very comfortable with all of our processes and procedures and liquidity frameworks,” Mr Feldman said. “It is just a matter of being clear and transparent with those stakeholders and making sure that they understand that we don’t have direct crypto exposure or digital asset exposure.”

Panellists were also asked about the impact of rising interest rates on their business strategy.

“We’re at a 22-year high for interest rates,” Mr Feldman said. “We are focused on the lending book and on our deposit levels. There are a lot of advantages to clients right now in terms of the higher yields that they can gain on savings and investment products.”

He said they were trying to stay close with clients and make sure they know how to navigate through this interest rate cycle.

“There is another Fed meeting on September 20,” he said. “Broadly, the market thinks the Fed is done and has paused, but who knows?”

Mr Feldman said that the last hike in the interest rate cycle was also typically the peak of real gross domestic product growth.

“If you’re at the peak, then there is probably some softer growth coming right afterward,” he said.

The Bermuda Captive Conference 2023, which began on Monday night with the PwC Bermuda sponsored opening reception, concludes today.

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Published September 13, 2023 at 8:00 am (Updated September 14, 2023 at 8:09 am)

US banking failures hold silver lining for Bermuda

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