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Moody's Investors Service in its latest report has said that most Asia-Pacific (APAC) financial institutions are not exposed to the failed US banks and are not as susceptible to large losses from debt security holdings as Silicon Valley Bank was. On March 12, US regulators closed Signature Bank, just two days after shutting Silicon Valley Bank, following mass withdrawals of customer deposits from these regional banks.

The US-based rating agency said these events are likely to result in a tightening of liquidity in debt markets globally as investors grow wary. However, the impact will be limited for most rated financial institutions in Asia-Pacific (APAC) because of structural factors. It said rated banks in APAC structurally have stable funding and ample liquidity. They are mostly funded with customer deposits, while their market borrowings are modest at about 16 per cent of their total assets on average. Their business depositors are well diversified across different sectors, with no rated bank in the region being heavily exposed to technology companies. Also, APAC banks' deposits are generally not heavily concentrated on single clients.

According to the report, most banks in the region are subject to liquidity coverage ratio (LCR) requirements that are aimed at ensuring banks hold ample high-quality liquid assets to get through stressed funding conditions, such as deposit runs. In most systems in APAC, banks' investments in held-to-maturity (HTM) instruments are generally not substantial relative to tangible common equity, unlike the case of Silicon Valley Bank, which suffered substantial unrealized losses from its large HTM investments.