Frankfurt am Main is not Zurich. Or maybe yes. Not even two weeks have passed since the flash rescue of Credit Suisse under the direction of the Swiss government, in conjunction with UBS, which another European institution, perhaps the most important, does not seem to be standing: Deutsche Bank. Its quotation, in one day it could not have been more difficult for the entire European bank, managed to drop 15%, partially recovering ground at the end of the day. It all started two days ago, when banks’ credit default swaps, financial products that make it possible to insure against the eventual bankruptcy of a company, often used for purely speculative purposes, reached their maximum. Real risk indicators whose five-year cost soared to 198 basis points from 134 on Wednesday. This for a very simple reason that, however, beware, may not be the only one. This is because the German bank itself has announced that it will prepay a subordinated bond in an attempt to send a message of confidence to the markets. However, this message seems to have had the opposite effect. In fact, concerns relate mainly to the risks associated with AT1 subordinated bonds, after the Swiss authorities decided to reset their priority value to shares within the scope of the redemption and sale of Credit Suisse to UBS. Some Deutsche Bank bonds of this type have sold heavily in recent days, causing the price to fall and raising the yield to 23%.
In other words, the fear of small savers and investors is that priority will be given to shareholders over bondholders. And that the early repayment of securities is an unexpected attempt at guarantee, perhaps not due. So I suspect. The panic of sales on the Stock Exchange did not take long to manifest itself, with Piazza Affari quite heavy throughout the day, until the close (-2.23%). Deutsche Bank practically dragged the entire European banking sector. In Paris, Société Générale sold 6.6%, Bnp Paribas 6.7%. The English Barclays 6%, the Spanish BBVA more than 6%, the Swiss UBS almost 8%.
At this point it is legitimate to ask what the ECB will do. That is, whether it will continue with its restrictive policy, raising the cost of money to 4% by the summer, or will there be a slowdown, as some countries, including Italy, are asking for. One thing is for sure, according to Fabi, the Italian banking syndicate, there is little to worry about. Because for Italian institutions any impacts arising from the crisis of Silicon Valley Bank and Credit Suisse are “almost impossible” (and perhaps also of Deutsche Bank at this point), is the message that emerged from a survey by the Federation that shows that the record of credit, a liquidity ratio of 176%, an asset quality level of 16.2% and a profitability level close to 9%. Will be.
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.
