![]() Now UBS faces the task of integrating Credit Suisse and sorting out its problems. In the global financial crisis, it was UBS that needed government help, while Credit Suisse did not. Said Shearing: “A reasonable base case is that we avoid a system-wide crisis on the scale of 2007-08, but further problems emerge at individual institutions.” Want to stay up to date with the latest federal news and information from all your devices? Download the revamped Federal News Network app banks ignore the risk that interest rates might swiftly rise, as Silicon Valley did? Could there be trouble in other parts of the financial sector that don’t take insured deposits, such as investment banks, hedge funds and mortgage brokers? “A key issue over the next week will be whether problems arise in other institutions or parts of the financial system.”Īmong the lingering worries: Did other U.S. “Containing crises is a bit like a game of whack-a-mole - with new fires starting as existing ones are extinguished,” said Neal Shearing, group chief economist at Capital Economics. And the way the takeover was done, by wiping out some of the Credit Suisse’s bondholders, rattled markets in those bonds. UBS shares initially plunged Monday on fears that the bank has simply inherited trouble by buying Credit Suisse. This crisis is far from over, but at least some of the immediate risks of an exponential ballooning of contagion effects have been mitigated.” But officials are showing that they learned one lesson from Lehman, “namely to act decisively and swiftly, and if needed to run roughshod over any discussion of moral hazard and legal obstacles, both of which can be discussed once the dust settles,” said Marc Ostwald, chief economist and global strategist at ADM Investor Services International.Īs a result, “some semblance of calm has been restored. Questions have been raised about the technicalities of the Credit Suisse rescue and the decision to insure all depositors at Silicon Valley. Congress came to the system’s aid with a $700 billion emergency economic stabilization act. Financial institutions had been in trouble since 2007, but it wasn’t until two weeks after Lehman that the U.S. government in 2008, when it let Lehman go under, spreading losses and fear across the financial system. Swiss officials balked at letting Credit Suisse just fail, unlike the U.S. That was a swift preemptive move used in earlier emergencies such as the pandemic market meltdown of 2020. On Sunday, just ahead of the opening of markets in Asia, other central banks joined the Fed in expanding unlimited dollar credit to any bank that needs it. Federal Reserve offered credit to banks that suffered uninsured losses on bond holdings due to rising interest rates. That said, economists, bank regulators and stock-market analysts generally say that banks are in better shape than in 2008, with thicker financial buffers against losses and a slew of new regulations.Īnd this time, policymakers have been quicker to respond. WILL THE TAKEOVER RESTORE CONFIDENCE IN THE GLOBAL FINANCIAL SYSTEM?Ĭonfidence in banks is shaky right now. When Credit Suisse’s biggest investor, Saudi National Bank, refused to put up more money, investors and depositors headed for the exits. failures made investors take a closer, less friendly look at banks. ![]() Unlike midsize Silicon Valley Bank, which went under earlier this month in the U.S., it is one of 30 banks classified as globally significant because it could pose a risk of bigger trouble if it collapses, as happened with Lehman.Ĭredit Suisse’s troubles pre-dated Silicon Valley’s failure, including a $5.5 billion loss on its dealings with private investment firm Archegos and a spying scandal. Swiss authorities pushed UBS to take over its rival after the price of Credit Suisse shares plunged and depositors fled, raising fears that it could fail.Ĭredit Suisse isn’t just any bank. Here are key things to know - and some things that aren’t yet known - about the takeover and the wider market anxiety fueled by bank failures in the U.S.įederal News Network's CX Exchange: Join us over two afternoons, April 26 and 27, where we will explore the technology, policy and processes that underpin agency efforts to serve the public, businesses and the government’s own workforce more effectively. investment bank Lehman Brothers pitched the global economy into a crisis. It’s another urgent attempt to fight fears that have put the financial world on edge 15 years after the failure of U.S. ![]() FRANKFURT, Germany (AP) - In a bid to ease turmoil in the world financial system, Swiss authorities engineered a plan for the UBS bank to acquire its troubled smaller rival Credit Suisse at a marked-down price.
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