Minimal Near Term Impact from Banking Turmoil on Rated U.S. Non-Bank Financial Institutions

This commentary discusses the impact of the failures of Silicon Valley Bank, Signature Bank and the ongoing banking turmoil on our rated U.S. non-bank financial institutions and their exposures.

Key highlights include:

• The failures of SVB and Signature have not posed an immediate threat to non-bank financial institutions (NBFIs) in DBRS Morningstar’s rated universe.

• Within our rated NBFI portfolio, the NBFIs have well-laddered debt maturities with 2023 refinancing needs being considered manageable with the large captive finance companies having the largest refinancing needs.

• If the steps taken by global authorities to date prove insufficient and additional bank sell-offs materialize leading to additional bank failures and greater instability in the capital markets, we expect the impact on NBFIs would become pronounced.

“While there is more uncertainty surrounding the direction of interest rates the Fed will take as it balances inflation and financial risks, asset-liability management will continue to be an important part of risk management for NBFIs.” said David Laterza, Senior Vice President, Head of NBFI, Global FIG.