The global banking sector is probably under the most strain since the financial crisis of 2008. In the United States, two smaller banks failed, and then the Swiss giant Credit Suisse asked for a lifeline in an attempt to fend off the adverse financial situation.
In addition to the regulatory authorities, large and globally important American banks have also decided to address potentially greater threats. In an effort to quell fears of a possible deepening of the banking crisis, a group of eleven large banking institutions in the US decided to support the regional financial institution First Republic Bank and put tens of billions of dollars into it. All this in just a few days.
The leading American financial institutions wanted to express their confidence in the resilience of the banking sector and in this particular banking company with this step. Looking at history, this is a relatively unprecedented step, as the central bank or the state itself usually provides financial assistance.
The American agreement across the banking sector was also helped to be created by leading American politicians, including the Minister of Finance Janet Yellen or the Chairman of the American Central Bank (Fed) Jerome Powell. But only time will tell if this will be enough to limit the damage.
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Czech banks are healthy
The major Swiss bank Credit Suisse is facing significant financial problems, but domestic banks are not at risk. The vice governor of the Czech National Bank (ČNB) Jan Frait and financial analysts are convinced of this.
The US banking system is robust
The US banking system is robust and will most likely avoid a systemic crisis. The situation surrounding the bank failures in the US has caused some upheaval, but banks are better capitalized than in 2008. In addition, banking regulation has tightened.
Small banks in the United States saw a record drop in deposits in the week to March 15, in which Silicon Valley Bank failed. According to data published by the US central bank, deposits decreased by $119 billion (CZK 2.6 trillion) to $5.46 trillion. That was more than double the previous record decline.
Small banks are defined as all but the 25 largest commercial banks in the US. Deposits at large banks, on the other hand, rose by $67 billion to $10.74 trillion, according to the Fed’s report.
As time went on with the banking crisis
March 8. American cryptocurrency bank Silvergate has decided to cease operations and begin voluntary liquidation. The business suffered losses after the dramatic collapse of the FTX cryptocurrency exchange, becoming another victim of the turbulence in the cryptocurrency market.
March 9. The American Silicon Valley Bank (SVB), focused on financing technology companies, especially startups, admits financial difficulties. Its shares fall by 60 percent. The bank tries to assure its clients that their money is safe.
March 10. The California regulator closes SVB and appoints the Federal Deposit Insurance Corporation (FDIC) as receiver. US bank stocks extend losses, with regional banks hardest hit.
First Republic Bank and Western Alliance said their liquidity and deposits remained stable, seeking to reassure investors worried about crisis spillovers. US Treasury Secretary Janet Yellen is also meeting with bank regulators over the collapse of SVB.
Biggest declines in bank stocks in the US
|Name||Decline per month|
|First Republic Bank||-88,72%|
11. March. The U.S. Fed and FDIC are considering creating a fund that would allow regulators to provide more money for potential withdrawals.
March 12. Minister Yellen said she was working closely with bank regulators in response to the SVB collapse. US officials later said SVB clients would be able to access their deposits.
The New York State Department of Financial Services is taking over New York-based Signature Bank. The bankruptcy comes just days after SVB’s troubles.
March 13. The British bank HSBC will acquire the British subsidiary of the bankrupt American bank Silicon Valley Bank for one pound (CZK 27). The takeover is meant to save an important lender to Britain’s technology start-ups.
The FDIC says it transferred all of SVB’s deposits to the newly formed bridge bank. Shares of US regional banks, led by First Republic, fell as credit risk indicators flashed red as investors worried about the risk of contagion.
US President Joe Biden said that the actions of US authorities should give Americans confidence that the banking system is safe.
March 14. Moody’s changes the outlook for the US banking system from “stable” to “negative”, citing increased risks.
March 15. Things are getting hot around the Swiss bank Credit Suisse. The annual report revealed cracks in the financial statements. The bank said it will strengthen its liquidity with a loan from the Swiss National Bank of up to 50 billion Swiss francs (over 1.1 trillion CZK).
March 16. US Treasury Secretary Yellen declares in the Senate that uninsured deposits will only be guaranteed at banks deemed “contagious,” raising concerns about smaller banks.
Major American banks put $30 billion (about CZK 680 billion) into First Republic Bank to support its financial situation.
The biggest declines in bank shares in Europe
|Earth||Name||Decline per month|
|Great Britain||Standard Chartered||-23,98%|
|Great Britain||Virgin Money UK||-22,75%|
March 17. The parent company SVB Financial Group of the bankrupt American bank Silicon Valley Bank declared bankruptcy. She requested court protection from creditors.
March 18. Switzerland’s biggest bank UBS is exploring a takeover of Credit Suisse, in which the Swiss government could offer a guarantee against the risks.
March 19. UBS agrees to buy Credit Suisse for three billion Swiss francs and agrees to assume losses of up to five billion francs.
March 22. Yellen tells lawmakers she has not considered blanket insurance of American bank deposits without congressional approval, again raising investor concerns. Fed Chairman Jerome Powell says SVB’s failure is not indicative of broader weaknesses in the banking system.
March 24. Deutsche Bank shares in Europe are falling more than eight percent, and prices to insure the company’s bonds against the risk of default are rising sharply. In Europe, other banking stocks are also falling.
March 27. First Citizens Bank of America will take over all the deposits and loans of the failed Silicon Valley Bank from the FDIC. The First-Citizens Bank & Trust division will receive a $16.5 billion discount on assets worth $72 billion (CZK 1.6 trillion), the FDIC said.