The turmoil in the financial sector again caused price drops in the stock markets today. Deutsche Bank shares fell 8.5 percent, affecting the prices of other European banks.
Share prices of Dutch banks on the Amsterdam Stock Exchange fell. ING shares ended the day down 3.7 percent, while ABN Amro dropped 2.2 percent. Bank stocks also went red in the rest of Europe.
persistent restlessness
The financial sector has been uneasy since the collapse of America’s Silicon Valley Bank (SVB) two weeks ago. Credit Suisse got into trouble last week. A multi-billion dollar takeover by rival UBS followed.
According to ABN Amro financial expert Joost Beaumont, the price drops are mainly due to investor fears. There would be basically very little in the European banks. “What you see in the stock market today is the aftermath of the Credit Suisse takeover and unrest at regional banks in the US. There is no clear reason from Deutsche Bank.”
Investors can hedge against risks using so-called credit default swaps. Since the collapse of the SVB, the price of Deutsche Bank’s credit default swaps has doubled. Beaumont says this was accompanied by a drop in the share price. “When trust falls, the need for insurance increases. There is a clear compromise.”
No imminent banking crisis, according to Rutte
Prime Minister Mark Rutte said that the unrest in the financial sector was discussed in detail at the EU summit in Brussels today. According to him, we should not be afraid of a new banking crisis because the banks are in good shape. He described the European banking system as very strong. “It’s normal for capital markets to move, it’s part of the system. You have to look at what’s underneath.”
Last week, the European Central Bank (ECB) raised interest rates again, and the previous day the US Federal Reserve (Fed) did the same. Rate hikes were one of the causes of Silicon Valley Bank’s collapse, but a rise in interest rates isn’t necessarily bad news for banks, according to Beaumont. “An increase in interest rates can cause a bank’s financial assets, such as bonds, to depreciate. But at the same time, banks get more interest income.”
Quarterly figures could calm things down
In mid-April, banks will release their first quarterly figures for 2023. Beaumont expects this to calm the stock markets again. “At the moment, no one knows exactly what happened. When these figures come out, it will be possible to act on facts rather than speculation.”
He expects European banks to be in good standing.
Source: NOS
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.
