Investor concerns revealed following collapse of SVB and Credit Suisse

Back in March this year, the failure of two major banks shocked the global financial system.

The Silicon Valley Bank (SVB), the 16th largest US bank, failed on the 11th of March after the depositors rapidly withdrew their investments in response to losses made by the bank.

This prompted the Federal Deposit Insurance Corporation (FDIC) to intervene, taking over the bank. On the 12th of March, the Federal Reserve, the Treasury Department and the FDIC announced that SVB depositors would have access to "all of their money".

The international bank Credit Suisse also experienced financial pressures in March, with "intensified liquidity stress and client outflows" according to the Bank of England's (BOE) Monetary Policy Report.

As a result, following intervention from the Swiss authorities, Credit Suisse was taken over by UBS in an acquisition worth 3 billion Swiss francs (£2.65 billion). The acquisition went ahead after previous attempts to stabilise the situation at Credit Suisse failed.

Today, on the 12th of June, UBS completed its acquisition of Credit Suisse. This means that "Credit Suisse Group AG has been merged into UBS Group AG", with the resulting entity now operating "as a consolidated banking group."

Consequently, today is the last day on which Credit Suisse Group AG shares will be traded on the SIX Swiss Exchange. For every 22.48 Credit Suisse shares held, shareholders will receive one UBS share.

The impact of banking turmoil

In the immediate aftermath of the banking turmoil, both the Bank of England (BOE) and the US Federal Reserve articulated their confidence in the wider stability of their banking systems.

Similarly, the BOE explained in their March financial policy summary that British banks remained "resilient", with sufficient strength to continue to support households and businesses.

However, the BOE also explained in the summary that caution followed the banking turmoil, with risky assets sharply decreasing in value in addition to uncertainty over interest rates.

More recently, a decrease in investor confidence in the banking sector has been identified by new market research commissioned by Shojin, an FCA-regulated online real estate investment platform.

Jatin Ondhia, CEO of Shojin, explains that the turmoil in the banking sector earlier this year has "added doubt and uncertainty to an already testing economic climate, with runaway inflation and rising interest rates posing questions for investors and their portfolios".

The research has investigated the effect of the SVB and Credit Suisse banking failures on investor confidence, with 2000 British adults surveyed from the first to the ninth of May.

Moreover, Ondhia explains how the research reveals concern amongst British retail investors that "the shockwaves from a banking crisis could impact both their investments and the wider economy."

Conducted by independent market research agency Opinium, the sample included 914 adults possessing investment portfolios worth over £10,000.

These investment portfolios included "all assets from bonds and currencies to commodities and stocks and shares". However, they excluded "any property that is used as their primary residency".

The research revealed the following statistics which shed light on the perspectives of retail investors in the aftermath of this year's banking failures.

Following the collapse of SVB and Credit Suisse, 49 per cent of retail investors "have less confidence in the banking sector", with 32 per cent experiencing a negative impact on their investments as a consequence of the banking turmoil. Furthermore, the number of investors "concerned" that the banking turmoil will cause further harm to the British economy was 55 per cent.

The research also revealed that 44 per cent of investors are now "less confident" in "traditional investment classes" compared to a year ago. Furthermore, 36 per cent expect "alternative asset classes" to be a larger part of "investment strategies" going forward.

Ondhia also highlights the importance of diversification as a way of rebalancing investment portfolios in the months ahead. For many, the use of alternative asset classes over traditional ones has a role to in diversifying investments, Ondhia explains.

On this issue, the research points out that for 37 per cent of investors, diversification will feature as a more important element of investment strategy over the next year.