Recent bank collapses in the United States have raised fears over the health of the banking system, leading to the White House taking emergency measures to prevent contagion. Silicon Valley Bank, the largest bank collapse since the 2008 financial crisis and the second largest in US history, was the first to fail.[0] This was followed by Signature Bank, and investors are now worried that other banks could follow.
Shares in San Francisco-based First Republic also fell by nearly 70% over the week as customers feared that it could be next in line for a run on deposits.[1] The bank has around $212 billion in assets under management and has about 7,200 employees.[2] However, it has not been able to allay all worries, with its announcement that it is suspending its dividend payments during this period of uncertainty leading to a 20% drop in after-hours stock market trading.
Credit Suisse, the 167-year-old Swiss bank, is also in deep trouble and has announced plans to borrow a staggering $54 billion from the Swiss National Bank as an unprecedented lifeline to boost its liquidity.[3] Shares in Credit Suisse have dropped again this Friday, sinking nearly 11% on the Swiss stock exchange despite the £44.5bn central bank lifeline aimed at restoring investor confidence.[4]
Central banks around the world have been raising interest rates to try to slow down inflation and cool the global economy.[5] The Financial Stability Board, an international body that monitors the financial system, lists Credit Suisse as one of just 30 institutions that are “systemically important”.[3] JPMorgan analyst Kian Abouhossein wrote in a note that the “status quo is no longer an option” and a takeover, most likely by Swiss rival UBS, is the most likely endgame.[6]
0. “What happened to Credit Suisse and why are banks needing bailouts again?” The Independent, 17 Mar. 2023, https://www.independent.co.uk/independentpremium/news-analysis/first-republic-credit-suisse-uk-latest-b2302567.html
1. “Credit Suisse shares hit as investor fears reignite” BBC, 17 Mar. 2023, https://www.bbc.com/news/business-64986520
2. “Shares of First Republic and Credit Suisse tumble despite new capital” CBS News, 17 Mar. 2023, https://www.cbsnews.com/news/first-republic-credit-suisse-stock-price
3. “Credit Suisse: Imperiled global investment bank has CCP-tied official on risk committee” Fox News, 17 Mar. 2023, https://www.foxnews.com/politics/credit-suisse-imperiled-global-investment-bank-ccp-tied-official-risk-committee
4. “Trending tickers: Credit Suisse | First Republic | Shell” Yahoo News, 17 Mar. 2023, https://news.yahoo.com/trending-tickers-credit-suisse-first-republic-shell-133648446.html
5. “Inside Credit Suisse: Why big Swiss bank with Triangle presence is in trouble” WRAL TechWire, 17 Mar. 2023, https://wraltechwire.com/2023/03/17/inside-credit-suisse-why-big-swiss-bank-with-triangle-presence-is-in-trouble/
6. “Credit Suisse Got Its Lifeline. Now It Must Win Back Clients” Yahoo News, 17 Mar. 2023, https://news.yahoo.com/credit-suisse-got-lifeline-now-210358097.html