Two Major Banks in Europe Turn to Regulators for Reassurance Amidst Credit Suisse Fallout

As the fallout from Credit Suisse’s woes spreads, at least two major European banks are expressing concerns about contagion in the region’s banking sector. According to senior executives close to these discussions, these banks are turning to the Federal Reserve and the European Central Bank (ECB) for stronger support signals.

Internal Deliberations

The executives, who spoke separately to Reuters, revealed that their banks have already deliberated on how soon the ECB should highlight banks’ resilience, specifically their capital and liquidity positions. However, these discussions focus on whether making such statements too soon may cause further alarm.

Despite the executives affirming that their banks and the sector are well-capitalized and their liquidity is strong, they fear that the crisis of confidence in Credit Suisse will spread to more lenders. They suggest the Federal Reserve may have to be the first to move, given the recent failures of Silicon Valley Bank and Signature Bank in the United States that triggered broader European concerns about the banking industry.

ECB’s Reluctance to Make Public Statement

A third executive at another major European bank, who spoke separately to Reuters, suggests that the ECB would be reluctant to make a public statement before markets reopen. This executive questions whether the ECB would judge it necessary and adds that the main focus is still on talks in Switzerland.

The European Central Bank declined to comment, and the Federal Reserve had no comment.

Related Facts

• UBS is close to completing a deal to buy its rival Credit Suisse, valued at more than $2 billion after UBS increased its offer. (Reuters)
• A further selloff in banks could erode the depositors’ confidence in their lenders, leading to a flight to safety and undermining the sector’s ability to lend. (Reuters)
• Banks in the US and Europe have experienced significant sell-offs, with US banking stocks down 22% and European banking stocks down 17% in March. (Reuters)

Key Takeaway

The current crisis facing Credit Suisse and the broader banking industry is a cause for concern amongst investors, depositors, and policymakers. Moreover, the anxiety amongst banks is palpable as contagion risk is high, and they fear that the crisis of confidence could sweep up more lenders. As such, the banks are calling on regulators for reassurance in these turbulent times.

Conclusion

The continuing fallout from Credit Suisse’s woes is another reminder that the banking industry remains fragile, and systemic risks remain prevalent. The uncertainty that continues to plague the banking sector is a cause of anxiety for both investors and regulators alike. We must remember that the sector has been tested before, and lessons have been learned from previous crises.