This week, the markets remain on alert, obsessed by the risk of a banking crisis, despite the very rapid reactions of the public authorities and their very reassuring speeches. Deutsche Bank has been in the eye of the storm since Friday March 24.
According to Chancellor Olaf Scholz, there are no worries about the first German bank. What its results confirm, record profits in 2022. But that is obviously not enough to make up for its bad reputation. Accusations of money laundering and fraud punctuate its recent history, and these facts are still in the memory of the markets which scrutinize and overinterpret the slightest transaction of the bank in which they now see the new weak link.
By repaying part of its so-called subordinated bonds earlier than expected, it triggered their distrust on Friday March 24. The markets saw it as a sign of nervousness, when they could have welcomed his ability to repay faster than expected. His action violently unscrewed. In this smoldering crisis, no magician of words has so far succeeded in overcoming mistrust.
The American public authorities reacted strongly after the panic of the first link, the Silicon Valley Bank. Could they have acted upstream?
Regulators warned the bank as early as 2019 that it was not careful enough in its risk management. Without realizing that the number of uninsured accounts had become a problem in itself. And without going so far as to take sanctions. A step that must be motivated by well-supported evidence, which can take months to gather.
The slowness of their procedures, driven by a climate favorable to the relaxation of constraints, is certainly one of the weak points that will be closely examined by the investigators appointed by the Federal Reserve. Its president, Jerome Powell, believes that regulators must adapt to our digital age. Before smartphones, you had to go to the counter, or at least call your bank to withdraw your money. This operation is carried out today with a simple click on a mobile phone. It is therefore necessary to find a parry to this acceleration. In Switzerland, the Minister of Finance indicated during the weekend of March 25-26 that she was worried about the fate of Credit Suisse as soon as she took office in December. Here again, the awareness is insufficient, because the bank has also been swept away by a banking panic.
Bank panics all the more impressive as they were the fact of the richest customers.
After the debacle of the subprimes which contained credits that the bankers had granted by turning a blind eye to the solvency of households, they became more cautious, and some turned to the clientele of wealthy people, considered more secure. At the SVB, current accounts exceeding the threshold of 275 000 dollars guaranteed by law were very many. First Republic is also a bank oriented towards this type of clientele, and Credit Suisse was historically a bank of billionaires.
These wealthy, highly informed customers were the fastest to withdraw their money.
Given the importance of their deposits, their withdrawals have multiplied the bank panic effect. Unlike in 2008, it is not the poor who are the first to be affected by the crisis, but the rich. Perhaps the start of the richsession “, according to Wall Street Journal. The American business daily coined the term in January, to describe what it had in mind for this year : an economic crisis which first hits the top of the income pyramid. Which does not mean that those at the bottom will be spared.