The Swiss bank is the first major world bank to be thrown an emergency lifeline since the 2008 financial crisis and its problems have raised serious questions about whether central banks will be able to sustain aggressive interest rate hikes.
However, the European Central Bank raised rates by 50 basis points on Thursday, as planned, underscoring the resilience of the euro zone banking sector and ensuring that it had enough tools to offer liquidity support if needed.
Shares of major US banks were rebounding from their recent lows, with JP Morgan, Morgan Stanley and Bank of America leading the way.
The US Treasury Secretary, Janet Yellen, declared that the country’s banking system remains strong thanks to the “decisive and forceful” measures taken after the failure of Silicon Valley Bank (SVB).
The unrest spread beyond the financial sector, with German company treasurers being urged by their industry association “not to underestimate the current situation.”
Since March 8, before Silicon Valley Bank’s bankruptcy last week, European banks have lost about $165 billion in market value, according to Refinitiv data.
The troubles at 167-year-old Credit Suisse have shifted the focus of investors and regulators from the United States to Europe, where the Swiss lender led a selloff of bank shares after its biggest investor said it could not provide more. funds due to regulatory restrictions.
That amplified fears raised by the bankruptcy last week of US SVB and Signature Bank, which sent bank shares on a rollercoaster ride as investors feared a collapse like that of Lehman Brothers, the Wall Street giant whose bankruptcy triggered the global financial crisis.
Investors are now watching for any action by central banks and traders are betting that the Fed, which was expected last week to accelerate rate hikes amid persistent inflation, will either pause or reverse.
Rapidly rising rates have made it harder for some businesses to repay or service loans, raising the chances of loss for lenders already worried about a recession.
