Recession Credit Suisse - DOOM

[SueEllen]

Crash Crash fears.

https://www.theguardian.com/business...oss-larry-fink


The collapse of Silicon Valley Bank could just be the start of “a “slow rolling crisis” in the US financial system with “more seizures and shutdowns coming”, the chief executive of the world’s largest asset manager has warned.

The CEO of BlackRock, Larry Fink, also predicted in a letter to investors and company bosses that inflation would persist and rates continue to rise, trends that both contributed to SVB’s collapse.

The failures over the past week of not only the California-based bank but also fellow US lenders Signature and Silvergate have prompted jitters across global markets. Such concerns were further fuelled on Wednesday when shares in Credit Suisse plunged to record lows after the troubled Swiss lender’s biggest investor ruled out providing it with more funding.

Fink described the situation as the “price of easy money” that was having to be paid after the Federal Reserve’s decision to start aggressively raising interest rates. “Something else had to give as the fastest pace of rate hikes since the 1980s exposed cracks in the financial system,” he said.

Fink added it was not yet clear where new victims of the “asset-liability mismatches” that claimed SVB would be found.

“It’s too early to know how widespread the damage is,” Fink wrote. “The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge.”

However, other leading financial figures warned that the instability brewing in the European banking sector could pose an even bigger threat to global market stability.

The high-profile economist Nouriel Roubini told Bloomberg news that if Credit Suisse were to collapse it could result in a “Lehman moment” – a reference to the collapse of the US investment bank Lehman Brothers in August 2007 at the start of the global financial crisis.




https://www.theguardian.com/business...-business-live

- oil prices lowest in 15 months
- FTSE falls 3.8%
- Credit Suisse shares have plunged 30% to another fresh all-time low, of 1.56 Swiss francs.

https://www.theguardian.com/business...-national-bank

Credit Suisse shares have plunged more than 20% to record lows after its largest shareholder, Saudi National Bank (SNB), said it would not be able to stump up more cash for the beleaguered Swiss bank because of regulatory restrictions.

SNB’s chair, Ammar al-Khudairy, said he would not be able to spend any more money to support Credit Suisse, since the Middle Eastern lender had already accumulated a 9.9% stake. “Well, we can’t … We cannot because we would go above 10%,” he told Reuters in an interview.

However, Khudairy said he did not believe Credit Suisse would need a fresh capital injection. “I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries,” he said on the sidelines of a conference in Riyadh.

However, the prospect of limits on cash from white knight investors from the Middle East still spooked markets, sending Credit Suisse shares down more than 15% to a record low of 1.73 Swiss francs a share, before trading was halted. Investors also sold European banking stocks, which have already been battered this week after Silicon Valley Bank’s collapse.

[TheDude]

Bad news for contractors too good for RBS or Barclays but too tulip for Citi or BAML.

[SueEllen]

Euro Zone has raised interest rates.

https://www.theguardian.com/business...-credit-suisse

The European Central Bank has raised interest rates across the eurozone by 0.5 percentage points, despite fears that higher borrowing costs could set off a domino effect across a banking sector already reeling from a collapse in confidence in Switzerland’s second largest lender, Credit Suisse.

Officials at the ECB, the central bank covering the 19-member euro-bloc, said inflation was likely to remain high “for too long”, forcing it to continue with its planned run of rate increases.


The 0.5 percentage point rise pushes the central bank’s main rate up to 3.5%, while the rate paid on eurozone bank deposits left at the ECB increases to 3%.


The ECB had flagged its intention of a rate rise at its last meeting, which took place in February, but financial markets had been betting on a U-turn in light of recent turmoil. The decision to push ahead with inflation control measures came hours after the Swiss Central Bank stepped in with a CHF50bn (£44bn) loan facility for Credit Suisse. The intervention was designed to calm fears over the finances of the lender, one of 30 banks globally deemed too big to fail.

Without referencing the overnight rescue loan, the ECB said on Thursday that its governing council was “monitoring current market tensions closely” and stood “ready to respond as necessary to preserve price stability and financial stability in the euro area”.

In a statement designed to quell fears over contagion in the banking sector, the ECB said: “The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.”

Christine Lagarde, the president of the ECB, said the central bank would treat the heightened tensions in financial markets separately from its strategy for bringing down inflation.

[SueEllen]

There may be trouble ahead....

Professor Danny Blanchflower former member of the MCB said there is a banking crisis

https://www.lbc.co.uk/news/bank-of-e...anking-crisis/

The Bank of England has held emergency talks amid fears of a new global banking crisis after the worst day for FTSE since the beginning of the pandemic and a Swiss lender took a £44 billion bailout.

[SueEllen]

And a US one -

https://www.theguardian.com/business...-rescued-lates


Wall Street’s giants moved to end the US’s spiraling banking crisis on Thursday by agreeing to prop up troubled First Republic, a mid-sized bank whose shares have been pummeled amid a wider banking turmoil.

Bank of America, Goldman Sachs, JP Morgan and others will deposit $30bn in First Republic, which has seen customers yank their money following the collapse of Silicon Valley Bank (SVB) and fears that First Republic could be next.

“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said in a joint statement on Thursday.

The big banks have received billions in deposits from smaller, regional banks as the banking crisis has spooked their customers. US authorities swooped in to take control of SVB and New York’s Signature bank last weekend after frightened customers pulled their deposits.

Banks and regulators are hoping that the action will act as a firewall by protecting First Republic and stopping the crisis spreading to other smaller banks.
Shares in First Republic – a San Francisco-based bank that largely caters to wealthier clients including Facebook co-founder Mark Zuckerberg – had fallen about 70% since the news of SVB’s collapse. They fell another 22% on Thursday before the bailout but ended the day up nearly 10%

[jamesbrown]

UBS bailing out CS. But..... 16bn euro of AT1 bond holders are completely zeroed out.

I'm sure that will go down well in the markets, given that shareholders are getting 3bn or whatever.

Probably not the end of the d00m.

[jamesbrown]

https://www.reuters.com/business/fin...rs-2023-03-19/

[DealorNoDeal]

After 13 years of ultra-low interest rates, it's not surprising that a few cracks appear in the system when rates jump 10-fold* in less than 12 months.

* In the US, the rate was 0.5% last May; now it's just shy of 5%.

[Fraidycat]

After 13 years of ultra-low interest rates, it's not surprising that a few cracks appear in the system when rates jump 10-fold* in less than 12 months.

* In the US, the rate was 0.5% last May; now it's just shy of 5%.

It is not just a few cracks, it is widespread in the US banking system, only the biggest banks are not struggling, actually they get more deposits as customers flee the smaller banks. The smaller banks will be getting secret loans from the central banks. These are being kept quiet to avoid further bank runs. The Fed is effectively doing Trillions more in QE. This is why Bitcoin ran up 10,000 points recently, the Fed is printing more money and cant raise interest rates as much to bring down inflation.

[Protagoras]

Maybe someone familiar with the banking sector can explain the 'shock' ...

We have statements in the news, such as "Central banks around the world have been raising the cost of borrowing to try to dampen down rising prices. After years of very low interest rates, that has come as a shock."

https://www.bbc.co.uk/news/business-64951630

Why is this a 'shock'. It's been plainly obvious for years that the era of cheap money could not last forever.
I'm actually surprised that it's taken so long for inflation to become obvious. Surely these well paid bankers who think that they're cleverer than the rest of us would have seen this coming, and planned for it.

Perhaps the real 'shock' is the unwillingness of the public to bail them out and again reward their incompetence.

At the micro-scale, the UK Govt should raise the £85k deposit guarantee to prevent runs on the smaller banks as people seek to limit their exposure.