Financial panic continues after the fall of Silicon Valley Bank (SVB). The shares of Credit Suisse, the second largest bank in Switzerland, have plummeted again this Friday by 24.24% on the Zurich stock market and the entity has been forced to request a rescue of 50,000 million from the Swiss central bank. The European Central Bank (ECB) is closely monitoring the tensions in the banking sector and has convened its Supervisory Board “urgently” in Frankfurt to analyze the latest events. According to information from the Reuters agency, experts have ruled out a “contagion effect” of the financial storm in the United States in European banks.
Fear of a possible financial crisis has spread across the Old Continent, despite the reassuring messages from European regulators and supervisors. The alarms went off again on Thursday night when the president of the Saudi National Bank – the main shareholder of the Swiss entity – assured in an interview with ‘Bloomberg TV’ that his bank will not inject more money into Credit Suisse.
In the midst of this complicated panorama, the ECB Supervisory Board has met to analyze the situation in the Eurozone. The body, which usually holds this type of ‘ad hoc’ meeting on a regular basis when “drastic changes” occur, has analyzed the impact on the Eurozone of the intervention of the SVB and the bailouts of Credit Suisse and the US bank First Republic, this last for a value of 30,000 million.
This technical group has exchanged views on the prevailing “great uncertainty”, as confirmed to this newspaper by an ECB spokeswoman. The meeting was brief and no firm decision was expected. It has concluded that yes, with a message of calm: European banks are “solid” and “resilient” and the Eurobank “is prepared” to inject liquidity and act “if necessary”.
The ECB has been in close contact with European banks to monitor possible “secondary effects” of the US crisis on the sector. In particular, the fall of the Swiss bank Credit Suisse is worrying. Despite these turbulences, the body remained firm on Thursday in its decision to tighten its monetary policy and carry out its sixth rate hike since July, of 50 basis points, as it advanced in February.
The head of the European bank, Christine Lagarde, also stated that the recent financial instability required making “a robust decision” by the European institution and this measure was supported by the vast majority of the Governing Council. All in all, she explained that the entity will pay more attention to the “available information” with a view to its next decisions and could moderate its rate hikes after what happened with SVB, Credit Suisse and First Republic.
The ECB and the representatives of the European institutions have closed ranks during the week to defend the “strength” of the European banking sector. And the head of the French central bank, François Villeroy, has insisted this Friday that “French and European entities are extremely solid.” “They are not in the same situation as some US banks for a very simple reason, which is that they are not subject to the same rules,” he added.
Lagarde also banished the specter of a possible financial crisis on Thursday: “We are not seeing a liquidity problem and now the banking sector is much stronger than then,” she said, aware that confidence in the European markets depended on her words.
inflation in the eurozone
In this context of rising rates, Eurostat released this Friday the confirmed year-on-year inflation rate for the euro area for February, which stood at 8.5%, which implies a drop of one tenth compared to the data for January. while the underlying rate climbed to a record of 5.6%.
Thus, the year-on-year inflation rate in the euro zone accumulates four consecutive months of deceleration and stood at its lowest level since May 2022, before the ECB began to raise interest rates.
Among the EU countries, the lowest inflation rates were observed in Luxembourg (4.8%), Belgium (5.4%) and Spain (6%), while the highest increases were registered in Hungary (25.8%). %), Latvia (20.1%) and the Czech Republic (18.4%).