Turmoil returned to the markets yesterday less than 24 hours after her intervention Bank of Switzerland with a loan of 54 billion dollars in winter Swiss credit and with the aim of rescuing the second largest Swiss bank.
The investors they are looking for the next vulnerable bank to fail and anxiety begins to spread across the globe, bringing with it falling bank stocks and ominous predictions like Nouriel Roubini’s talking about new financial crisiswith Credit Suisse now the new Lehman Brothers.
At the start of the session in Europe, European bank shares showed a rebound, with the EuroStoxx 600 banking index rising 3.7% and Credit Suisse jumping 40%, before later paring gains to 25%.
Soon, however, the American bank First Republic was targeted and with it a number of mid-sized US regional banks treated as Silicon Valley Bank bonds. First Republic’s stock fell 36% yesterday (and a total of 80% since March 8), despite efforts to convince customers and creditors that it is not experiencing corresponding problems. Which is largely true, as First Republic does indeed have healthy finances. Last night 11 US banks announced the provision of $30 billion in liquidity to First Republic.
JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will give $5 billion each, Goldman Sachs and Morgan Stanley each $2.5 billion and BNY Mellon, PNC Bank, State Street, Truist and US Bank from $1 billion. Following the announcement of the deal, its stock soared and closed up 10%. With apparent relief, in a joint statement, US Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell welcomed the agreement to support the struggling credit institution.
Founded in 1985, First Republic offered mortgages to wealthy Californians, while SVB financed start-up and sometimes precarious technology companies. In recent years, investors have poured unprecedented capital into high-tech companies, and since then the two American banks have begun to have the same customer base.
Investors have been targeting many of the medium-sized regional financial institutions since yesterday.
Investors have also targeted many of the mid-sized regional US banks since yesterdaysuch as Western Alliance Bancorp, PacWest Bancorp, KeyCorp, Comerica Inc and Fifth Third Bancorp, saw their shares plummet, with some losing 3.5% but others sinking 30%.
Many of the big US banks were not unscathed, however, with giants JP Morgan, Morgan Stanley and Bank of America all down between 1% and 1.5% since the start of the session. Meanwhile, concern is spreading across Europe, with the chief financial officers of several German companies, such as Hapag-Lloyd and BASF, saying they are closely monitoring developments and market players stressing that “the range of developments and the speed with which which were transferred to the money markets”.
“The 50 billion franc loan is not enough”
The Swiss authorities emphasized that Credit Suisse will be granted a 50 billion franc loan because the second-largest Swiss bank “meets the capital adequacy and liquidity requirements applicable to systemically important banks.” Market analysts point out, however, that the loan will not solve all the bank’s problems, as Credit Suisse has slipped and been hit by its past investments in toxic securities and its loss-making exposures to the Archegos fund. amounting to 5.5 billion dollars.