Banking turbulence keeps the financial world in suspense: despite a multi-billion dollar support package, the ailing major Swiss bank Credit Suisse is once again under pressure on the stock market. In the US, too, the situation remains tense following a joint rescue effort by major financial institutions for a failing regional bank. ECB Banking Supervision wanted to address the issues in a special meeting on Friday.
A spokeswoman for the European Central Bank (ECB) said the supervisory body met to exchange views and update members on current developments in the banking sector. There was a special meeting earlier this week.
ECB: “Euro area banking sector is resilient”
Banking supervisors usually meet regularly in such situations. The central bank had previously emphasized: “The euro area banking sector is resilient: capital and liquidity positions are solid.”
In the US, the next money house needs help
A billion-dollar bailout from the Swiss National Bank for Credit Suisse in Europe was followed on Thursday by a coordinated bailout for another troubled bank in the United States. Due to liquidity problems and severe stock market losses, regional bank First Republic received a total of $30 billion in cash from the largest US financial institutions, including JPMorgan Chase, Citigroup, Bank of America and Wells Fargo. The move is “very welcome” and demonstrates the resilience of the banking system, according to a joint statement from the Treasury Department and the Federal Reserve.
Nervousness remains high on the stock markets
However, the nervousness on the stock market remains high: the Credit Suisse share plummeted again on Friday and sometimes fell by double digits to CHF 1.767 (EUR 1.79).
The Swiss National Bank had provided the troubled financial group with a relief package in the form of loans of up to CHF 50 billion (almost EUR 51 billion). But the measure only temporarily reassured Credit Suisse shareholders, even though the price was still some way off Wednesday’s low of CHF 1.55. Meanwhile, First Republic Bank fell 20 percent in US premarket trading.
Experts: Europe must be prepared
However, according to financial expert Gerhard Schick, Europe needs to catch up with the US in banking regulation to be prepared for emergencies. When California’s Silicon Valley Bank ran into trouble, the US deposit insurance system immediately intervened and managed to create stability very quickly, according to the board of directors of the Finanzwende citizens’ movement in ARD’s Morgenmagazin. “In Europe, we have not yet had such an authority that combines liquidation and deposit insurance.” Here the banking union came to a standstill halfway. “You really have to deal with that now,” said the former German member of the Bundestag for the Greens.
ECB raises interest rates
Despite the uncertainties in the banking sector, the ECB continued to raise interest rates on Thursday. The French central bank chief François Villeroy de Galhau sees this as an important signal against the sharp price rises. “It is confidence in our anti-inflation strategy and it is confidence in the soundness of our European and French banks,” the ECB Governing Council member told BFM Business radio on Friday. “The French and European banks are very solid.” The ECB had raised its policy rate by another 0.5 point to 3.5 percent for the sixth time in a row.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
