While the
issues involving Silicon Valley Bank (SVB) and Credit Suisse (CS) seem to be
resolved, regulators are not ready to let go of the banking sector just yet.
Klaas Knot, the Chairman of the Financial Stability Board of G20, announced today
(Thursday) that the circumstances surrounding these institutions and the entire
industry will be thoroughly scrutinized.
G20 to Investigate the
Collapse of SVB and Credit Suisse
The
Financial Stability Board primarily aims to investigate whether SVB and CS
complied with the prevailing banking regulations and how they calculated their
liquidity buffers.
SVB’s
problems began in March. Later that same month, following its collapse, it was
sold to HSBC for a symbolic pound. Even though US regulators concluded that the
institution’s issue was not systemic, thus its negative impact spilled over to
the European market. This was to such an extent that it drove the already
struggling Credit Suisse to the brink of bankruptcy.
Credit
Suisse could have collapsed if not for a takeover by takeover by UBS enforced by the
Swiss government, which used tools introduced after the 2008 global financial
crisis.
“This
is not just a European issue; it’s a problem in other parts of the world as
well. Supervision on our side has clearly fared better than on the other side
of the Atlantic,” Knot commented during an event organized by the European
Banking Federation.
As the
representative of the Financial Stability Board and the Dutch central bank’s head,
Knot maintains that it is crucial to scrutinize how American and Swiss
authorities responded to the internal banking system crisis. In his opinion, it
is high time to reconsider the liquidity coverage ratio, cash buffers, and
other liquid instruments. Banks must maintain them to cope with short-term
financing constraints.
“The level
of economic uncertainty is now as high as it has been since the depths of the
pandemic, with many fearing a repeat of the 2008 Global Financial Crisis,”
David Kindley, the Market Strategist at Orbex, commented.
Banking Crisis Shook the Broad
Market
The issues
of SVB and several other American banks not only led to the takeover of Credit
Suisse in Europe but also a temporary crash in the shares of financial
institutions around the world.
From its
February peak, the NASDAQ Bank index has fallen 36%, and its twin index on
Euronext lost almost 18% over the same period.
The biggest
winner in this market uncertainty caused by failing banks turned out to be
Bitcoin (BTC). It began March by testing the psychological support level of $20,000,
only to reach its annual highs a month later, adding 70% to its value.
HSBC, the
new owner of Silicon Valley Bank, seeks to distance itself from its ‘dark past’.
As a result, it will rename its UK division to HSBC Innovation Banking,
representatives of the institution announced earlier this week. However, the
question remains: is rebranding enough to conceal past mistakes?
Credit Suisse Returns Emergency Lifeline
Credit Suisse also repaid the emergency liquidity of the Swiss100 billion Swiss franc ($112.50 billion) loan it received as a lifeline from the Swisse government, the country’s Finance Minister Karin Keller-Sutter confirmed.
“The federal guarantees, the 100 billion, have been repaid as of yesterday (Tuesday),” Keller-Sutter said.
Earlier, the Swiss lawmakers criticized the government’s decision for offering the financial rescue package guarantee, and even voted against the move in the lower house of the Parliament. However, voting was symbolic, as lawmakers cannot overturn the state’s commitment to the funds.
This article was written by Damian Chmiel at www.financemagnates.com.
