It has not been a good week for the global banking community. Starting with Silvergate Bank and ending (so far) in emergency purchase of Credit Suisse, the underlying lack of confidence has cost $459 billion.
The half a trillion dollars, wiped out by investors, from the value of bank shares around the world is the worst rout for the financial sector since the onset of the Covid-19 pandemic.
Financial stocks plummeted as the fallout from the collapse of Silicon Valley Bank spread through global markets.
Banks in the US, Europe and Japan have collectively lost $459 billion in market value so far this month — the 16% fall is the sharpest slump since March 2020.
Efforts to stabilise the financial system and head off broader panic have been only partly successful. Credit Suisse shares fell 8% even after the provision of a SFr50 billion ($54 billion) emergency credit line from the Swiss central bank – and then didn’t stop falling.
Over the weekend the bank was rescued in a last minute purchase by rival UBS for $3.25 billion.
“On Friday the liquidity outflows and market volatility showed it was no longer possible to restore market confidence, and a swift and stabilising solution was absolutely necessary,” Swiss president Alain Berset said at a press conference in Bern. “This solution was the takeover of Credit Suisse by UBS.”
The volatile markets have hurt even banks that are seen as stronger, with some affected by the yield on the two-year Treasury note falling at its fastest pace since 1987. Goldman lost about $200 million at its trading desk that deals in interest rate products.
Global regulators held talks on Friday evening to discuss how to calm fears about the health of the financial system, with some focusing on options to stabilise Credit Suisse and its international subsidiaries.
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