The footsteps of the financial crisis are approaching

2008 Concerns that the financial crisis experienced in 2018 could be experienced again turned markets upside down. The European Central Bank (ECB) is expected to take a similar step, while the US Federal Reserve (FED), which wants to prevent depositors from attacking banks and deepening the crisis, starts financing banks. . The Swiss Central Bank (SNB) provided $54 billion in support to Credit Suisse, a 167-year-old bank that was instrumental in spreading the crisis to Europe, to get out of the crisis. However, the strategists emphasize that selling the bank may be the best option. It is claimed that the Swiss bank UBS may be the most reasonable suitor.

THE GREATEST DANGER

According to economists, the effects of Credit Suisse, which is the 45th largest bank in the world and the 12th largest bank in continental Europe with total assets of $830 billion, may be much greater than the impact of Silicon Valley Bank ( SVB) in the US. Dynamic Investment Chief Economist Enver Erkan noted that the spillover effect for banks can be seen in two parameters as the crisis that started in the US spread to Europe. The effect of the first increases in interest rates on the value of assets. According to Erkan, this risk can be largely minimized if the increases are stopped. Another parameter is the response of the depositor. For a bank, the sudden, massive and massive withdrawal of deposits (bank run) is one of the biggest risks that can be experienced. Noting that there is a risk of depositors transferring deposits from small banks to large banks, even if the deposits are guaranteed, Erkan commented: “This creates a domino effect.”

The Fed provides $2 trillion of liquidity with loans

Following the bankruptcies of Silicon Valley Bank and Signature Bank in the US, the US Federal Reserve (Fed) announced a new bank credit line to help banks meet depositor demands and avoid a surge that could affect the banking system. According to the evaluation carried out by JP Morgan Chase, the emergency loan program implemented by the Fed could inject up to $2 trillion in funds into the US banking system and alleviate the liquidity crisis. The strategists are still in the American banking system.
Although it has reserves of 3 trillion dollars, a significant part of it is the largest
He wrote that he was held by the banks.

The sale of the US bank in crisis is on the agenda

All strategic options, including sales, were said to have been evaluated by First Republic Bank, one of the banks named in the US banking crisis. The bank, whose credit rating was downgraded to junk by S&P on Wednesday and the outlook of the rating was monitored as negative, it is evaluating strategic options, including sales, according to information Bloomberg has learned from sources close to the matter. The bank is also said to be evaluating other options to increase its liquidity.

Swiss bank for 167 years

CredIt Suisse Group AG has a history of 167 years and is the second largest bank in Switzerland. Another characteristic of the bank are the sanctions it receives. The bank, which was accused of manipulation, tax evasion and money laundering, had to pay fines for these matters. Struggling Credit Suisse posted a net loss of $7.8 billion in 2022. As part of a restructuring to strengthen the bank’s balance sheet, it began cutting costs and downsizing its workforce.