The bankruptcy of several US banks and the setbacks of Credit Suisse have shaken the banking sector for just over a week, reviving the specter of a financial crisis. Back in this “dark week” for banks.
• What happened to Silicon Valley Bank?
It all started with the announcement of the liquidation of Silvergate Bank, on Wednesday, March 8: this small regional bank, very popular in the cryptocurrency ecosystem, suffered massive withdrawals as a result of several accidents in the crypto world, including the bankruptcy of FTX. platform.
On the same day, a presentation from Silicon Valley Bank (SVB), which specializes in financing technology companies, alerted investors and clients, though it needed to reassure them, the bank was suffering from the slowdown in technology. They rush into their assets and the bank crashes on the stock market, bankrupting it. The Deposit Insurance Agency (FDIC), a branch of the US government, decided to take control of the bank from Friday March 10, on the brink of implosion under the effect of massive withdrawals.
• What happened to the US banks?
After the bankruptcy of SVB, medium-sized or regional banks suffered on the stock market. The fate of SVB’s deposits, of which only 4% of the $170bn it holds are guaranteed by the IFCD, worries the tech sector and anxiety is spreading to individuals and companies in other sectors.
To calm the panic, the Fed (the Federal Reserve, the US central bank), the US Treasury and the FIDC announce on Sunday that SVB clients will be able to withdraw all their deposits. The Fed is also taking out financial artillery by offering loans to all banks that need them to meet withdrawals. But the US authorities also announced, on the same Sunday, the automatic closure of Signature Bank, the twenty-first bank in the country and the third bankrupt of the week.
The following Thursday, March 17, a new bank, First Republic, the fourteenth largest bank in the United States, comes to a boil. However, eleven major US banks came to its rescue, depositing 30 billion dollars there to strengthen their liquidity and avoid contagion from previous bankruptcies. Without really allaying concerns, First Republic continues to fall in the stock market this Friday.
• What happened to Credit Suisse?
Number 2 in the Swiss banking sector, Credit Suisse has been piling up bad news since early March, notably the loss of one of its long-term shareholders and the publication of an annual report acknowledging “substantial weaknesses” in its internal controls.
But it is the statements by the president of the Saudi National Bank (SNB), its main shareholder, that are causing a wave of panic. In an interview given on Wednesday March 17, the latter assures that “not at all” was he going to recapitalize the Swiss bank in the event of a financial problem. The Credit Suisse share collapsed on the stock market (-24.24%) the same day, fearing the markets in particular a “bank run” by the great fortunes that placed their assets in Credit Suisse.
• Why are we worried?
If the SVB bankruptcy made markets very nervous, Credit Suisse’s “Black Wednesday” is not a direct consequence. Because the concerns about the group, considered the weak link in the Swiss banking system, are not new: after the bankruptcy of the British financial company Greensill in March 2021, a succession of scandals has weakened the group, which has lost more than 80% of its value. Not to mention the plummeting revenue and the presentation of a comprehensive restructuring plan.
Fueled by the Credit Suisse stock market crash and contagion fears, European bank shares also tumbled on the same day as a result of a panic move. Banks like Deutsche Bank, Commerzbank, Société Générale, BNP Paribas and Banco Sabadell lost more than 10%.
The Swiss central bank reacted by assuring its support and committing, on the night of Wednesday to Thursday, to lend up to 50,000 million Swiss francs (50,660 million euros) in cash to Credit Suisse. After the worst stock market session in its history, the banking group recovered momentum the following day (+19.15%). But the turbulence awoke this Friday, with the group falling again on the stock market. The stock closed with a fall of 8.01%.
• What were the consequences in Europe?
In Europe, the succession of bankruptcies in the United States and the Credit Suisse stock market crashes have revived the specter of the 2008 financial crisis. Stock indices and bank shares have been booed in recent days, given the aid given to US banks and the Swiss group brings calm to the markets.
At a meeting of the European Central Bank (ECB) the day after Credit Suisse’s “dark day”, its president, Christine Lagarde, wanted to reassure by guaranteeing that European banks were “solid”, but that the institution would be willing to intervene ” if necessary” to protect the financial system. And it is that, despite the turbulence, the ECB continued its fight against inflation and did not give up raising its reference rates that same day, as expected, by 0.5 basis points.
But the calm was short-lived despite all the life preservers: after a day of respite, the banking sector fell again on the stock market this Friday, taking all the European indices: around 3:00 p.m. (Paris time), Paris fell by 1.11 %, Frankfurt 1.04% and Milan 1.33%.
Source: BFM TV
