The banking sector continues to face major uncertainties despite various central bank interventions and the acquisition of Credit Suisse by UBS. Swiss bank UBS has acquired its troubled peer Credit Suisse for $3 billion. The Swiss central bank guarantees a loan of up to 100 billion Swiss francs, which amounts to an amount of more than 101 billion euros.
President Christine Lagarde of the European Central Bank (ECB) is pleased with the ‘quick action’ of the Swiss authorities. In a statement, Lagarde said the “actions and decisions of the Swiss authorities are of decisive importance in restoring orderly market conditions and ensuring financial stability.”
Central banks relieved
The US Federal Reserve and the Bank of England (BoE) also ‘welcome’ the news that the ailing Credit Suisse will be taken over. US Treasury Secretary Janet Yellen also said she was pleased with the acquisition. ‘Central banks believe that there is a lot of stress in the market,’ says FD correspondent Lennart Zandbergen from New York.
‘Central banks believe that there is a lot of stress in the market’
According to Zandbergen, the Fed will now allow other banks to buy dollars at the auction on a daily basis instead of weekly. This increases the liquidity of banks. If they want it, they can get it, is the message. Zandbergen calls it a precautionary measure with which the central banks build more security into the system.
American uncertainty
There is still great uncertainty in the US. Large parts of the collapsed Signature Bank have been bought by the New York Commercial Bank corp. taken over. However, this small bank does not want to take over many of Signature’s loans. ‘The bank does not fully trust that, the question is whether they will get rid of it.’ And in line with that, the key question arises: will there be a buyer for the Silicon Valley Bank? Because how many of those loans are considered worthless?
An uncertain factor remains the ailing First Republic Bank. This was kept afloat by fellow banks with a joint capital injection of USD 30 billion, but in the meantime credit rating agency S&P has given the bank a downgrade. “It’s now deep in junk status.”
