How Global Banks & Top Institutions Responded to the Banking Crisis?
Following the $SVB Financial Group(SIVB)$ crisis, $Credit Suisse Group AG(CS)$ also experienced financial failure. Will a financial crisis ensue? What measures are global banks taking and how are they responding to this banking crisis?
This article compiles the attitudes and response policies of Europe, Canada, and Japan towards this crisis, as well as the attitudes and responses of institutions such as JP Morgan, Bridgewater, and ARKK...
Recommend to read: Citi Research: The funding, Liquidity, Valueation, Risks of Credit Suisse
Swiss regulator says it will provide liquidity to Credit Suisse if necessary
Swiss regulators said they would provide liquidity to $Credit Suisse Group AG(CS)$ if necessary. The bank, which has suffered from its own financial health problems, has thus been given an important lifeline.
The Swiss central bank and Finma, Switzerland's top financial regulator, said Credit Suisse "meets the higher capital and liquidity requirements applicable to systemically important banks. The two regulators did not disclose details of what liquidity they would provide, but said they were in very close contact with Credit Suisse.
The fall in Credit Suisse shares quickly spilled over to a slew of European banks and triggered a mad rush of money into government bonds to hedge against risk, leading to market turmoil. Traders reported difficulties in buying and selling government bonds, which is the most serious market dysfunction since the new crown epidemic hit the world economy three years ago, causing panic.
Dutch credit agency ABN Amro: "If regulators don't handle the Credit Suisse situation well, there will be shock waves across the industry"
Joost Beaumont, head of banking research at Dutch credit agency ABN Amro, said the fall in Credit Suisse bonds and shares suggests that "investors judge the bank needs a bailout."
"If regulators don't handle the Credit Suisse situation well, there will be shock waves across the industry," he said. "To make matters worse, the banking industry on both sides of the Atlantic is in trouble."
Canada: protects creditors of the SVB Canadian branch by taking permanent control of its assets
The Superintendent of Financial Institutions took additional action to protect creditors of the Silicon Valley Bank (SVB) Canadian branch by taking permanent control of its assets, a statement said on Wednesday.
The statement from the Office of the Superintendent of Financial Institutions Canada also said the Ontario Superior Court of Justice had granted a winding-up order that would begin "an orderly, court-supervised process" to restructure the Canadian branch, following the creation of the Silicon Valley Bridge Bank.
Japan former board member: The SVB crisis may prompt the Bank of Japan to delay policy changes
Japan’s central bank could delay any changes to its monetary policy in light of the turmoil that the Silicon Valley Bank crisis triggered in financial markets, Nomura Research Institute economist Takahide Kiuchi, who served on the Bank of Japan’s policy board from 2012 to 2017.
And any changes to its ultra-dovish stance could be delayed by as much as a year, Kiuchi said.
Below are how institutional funds react to this banking crisis storm.
JPMorgan: Fed's emergency loan program will inject $2 trillion in liquidity into the U.S. financial system
$JPMorgan Chase(JPM)$ strategists believe the Federal Reserve's emergency loan program could inject as much as $2 trillion into the U.S. banking system and ease the liquidity crisis. They said that although the largest few banks are unlikely to take advantage of the program, the program envisages a maximum use of close to $2 trillion, which is the coupon amount of bonds held by the U.S. banking sector in addition to the five largest banks.
Cathie Wood: the primary culprit in the bankruptcies was Federal Reserve policy, not crypto
“In my view, Fed policy was the primary culprit. Because of a VC funding drought and higher yields on money market funds, deposits left the US banking system,” Wood says in a series of tweets. $ARK Innovation ETF(ARKK)$
Ray Dalio: it will have ripple effects in the venture capital space and well beyond it
He said, "Based on my understanding of the situation and what is happening now, the bank's collapse is a 'canary in the coal mine' and an early sign that it will have ripple effects in the venture capital space and well beyond it. " $Bridgewater Bancshares(BWB)$
According to Dalio, the collapse of SVB was a "very classic event," which he calls "a very classic part of the bubble bursting in the short-term debt cycle. This phase occurs when tight money aimed at curbing credit growth and inflation leads to a "self-reinforcing" contraction of debt and credit. This implies a "contagion process" where dominoes fall until the Fed eases policy, creating "easy money" and then setting the stage for the next big debt problem.
Dalio said that different cycles will see different bubbles. 2008 was real estate. This time it's private equity and commercial real estate companies that "can't withstand the shock of high interest rates and tight monetary policy.
Bill Ackman: U.S. did the ‘right thing’ in protecting SVB depositors
Billionaire investor Bill Ackman said the U.S. government’s action to protect depositors after the implosion of Silicon Valley Bank is “not a bailout” and helps restore confidence in the banking system.
Ackman further explained that in this incident, shareholders and bondholders of the banks will be mainly the ones affected, and the losses will be absorbed by the Federal Deposit Insurance Corporation’s (FDIC) insurance fund.
This is in contrast to the great financial crisis in 2007-2008, where the U.S. government injected taxpayers’ money in the form of preferred stock into banks, and bondholders were protected.
Not everyone agrees.
Peter Schiff, chief economist and global strategist at Euro Pacific Capital, said the move is “yet another mistake” by the U.S. government and the Fed.
He explained in another tweet: “The bailout means depositors will put their money in the riskiest banks and get paid higher interest, as there’s no downside risk.”
″... all banks will take on greater risks to pay higher rates. So in the long-run many more banks will fall, with far greater long-term costs,” Schiff said.
What do you think will happen next?
Do you agree with these famous investors?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
- Yx tan·03-15OkLikeReport
- GD Hazel·03-15OkLikeReport