The fear of banks in international markets is still great yesterday on the “three witches” day, that is, when index futures, index options and stock options expire at the same time. Meanwhile, for OECD Secretary General Mathias Cormann, “the failure of Svb (Silicon Valley Bank, ed) was significant as it was also the biggest since the 2007-8 financial crisis, but since then regulatory frameworks have improved much and while there is certainly an increase in risks to financial stability, we think the risks of contagion are largely contained.
However, yesterday the American Svb Financial Group, owner of Svb closed last week, filed for assisted bankruptcy, the so-called “Chapter 11”, thus marking the unenviable record of having been the largest North American financial institution this lawsuit after Washington Mutual’s 2008. Silicon Valley Bank, Svb Financial Group’s flagship business, was shut down by federal authorities, who took over to insure customers, and is not part of the Chapter 11 process, which provides companies with a process to find new owners for your assets. Svb Financial Group believes it has about $2.2 billion in cash.
In addition to cash and its holdings, it has other investment securities accounts and other assets for which it is also exploring strategic alternatives. Also in the United States, the First Republic Bank yesterday saw its shares fall by up to 20% on the stock exchange when it announced the suspension of dividends one day after 11 American banks injected US$ 30 billion to save the bank from bankruptcy. The directors of the operation were US Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and JP Morgan Chase CEO Jamie Dimon, who discussed the terms of the agreement. US regulators said the show of support showed the resilience of the banking system.
From the United States to Switzerland, yesterday was also a very difficult day for Credit Suisse, which also received a loan of 50 billion francs from the Swiss central bank the day before yesterday. In fact, the institute’s share plummeted, losing up to 8% and the coverage contract returned above 1,000 points after rumors spread that UBS, the other major Swiss bank, is unwilling to intervene as a «white knight», although its intervention is seen as almost inevitable.
The alternative scenario is that of a Credit Suisse stew handing over the most profitable deals to a variety of operators, including large private equity funds. Meanwhile, many investors are withdrawing their deposits from the bank and this further decreases its value. Curbing customer outflows will be key to straightening out the business, especially in light of the CHF 110.5 billion net outflows recorded in the fourth quarter. But from the United States, among other things, the news that Credit Suisse was sued by American shareholders with a class action lawsuit had repercussions. Shareholders’ charge against the Swiss bank is that it hid difficulties, both in terms of exits and weaknesses in internal controls over financial reporting.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.