The tumultuous 10 days for banks that culminated in the 3
billion Swiss franc ($3.2 billion) Swiss regulator-engineered
takeover of Credit Suisse by rival UBS were triggered by the
collapse of Silicon Valley Bank, which sank under the weight of
bond-related losses due to a surge in interest rates last year.
"The banking sector's near-death experience over the last
two weeks is likely to make Fed officials more measured in their
stance on the pace of hikes," said Standard Chartered head of
G10 FX research, Steve Englander.
Worries over the health of midsized U.S. lenders linger,
particularly First Republic Bank . But Credit Suisse's
rescue appeared to have assuaged the worst fears of systemic
contagion, boosting shares of European banks and U.S.
regional lenders.
After surging as much as 60% during Tuesday's session, First
Republic shares ended 29.5% higher, recovering some of their
deep losses over the past two weeks, while larger U.S. banks
also rallied. First Republic has shed 80% of its market value
this month, even after Tuesday's rebound.
US Bancorp jumped almost 9%, while JPMorgan Chase , Citigroup , Wells Fargo and Bank of
America all climbed more than 2%.
The S&P 500 banks index rallied 3.6%, its largest one-day gain since November. First Republic is looking at ways it can downsize if its attempts to raise new capital fail, three people familiar with the matter told Reuters. JPMorgan Chase has been helping the bank find new sources of capital after a $30 billion injection of deposits from big banks failed to stem fears over its viability. The bank is examining how it can sell parts of its business, including some of its loan book, in a bid to raise cash and cut costs, one source familiar with the situation said.
A sale of loans to other parties, including private equity firms, is one option under consideration, two of the sources said. While a sale of the entire bank remains possible, First Republic is focused on raising capital, the third source said. The scenarios were being discussed as major bank chief executives gathered in Washington for a scheduled two-day meeting starting Tuesday, sources familiar with the matter said. 'FEEL SECURE' Policymakers from Washington to Tokyo have stressed the current turmoil is different from the crisis 15 years ago, saying banks are better capitalised and funds more easily available. In the latest effort to calm jitters, U.S. Treasury Secretary Janet Yellen said the country's banking system was sound despite recent pressure. Yellen said she was committed to taking actions that would mitigate risks to financial stability and taking necessary steps to ensure the safety of deposits and the U.S. banking system.
Political pressure continued to grow in the United States to hold bank executives accountable. The Senate Banking Committee's chairman said the panel will hold the "first of several hearings" on the collapse of SVB and Signature Bank on March 28. Yellen's reassurances were echoed in Britain by Finance Minister Jeremy Hunt, who said banks and the financial system there were well-placed to cope with the problems, and by Swedish Central Bank Governor Erik Thedeen. "We should also feel secure in the fact that the authorities that have the job to deal with this are working closely together and are working with the government. So there is good capacity to act should this head into another phase," Thedeen said. The European Central Bank's top bank supervisor Andrea Enria said euro zone banks on average increased their capital ratios in the final quarter of last year and remain solid, adding that funding and liquidity positions were not "materially affected" by the Credit Suisse crisis. Worries about a new financial crisis contributed to a tumble in German investor sentiment in March, the ZEW economic research institute said.
The investor focus in Europe also shifted to the massive
blow some Credit Suisse bondholders will take, prompting euro
zone and British banking supervisors to try to stop a rout in
the market for convertible bank bonds.
Additional Tier 1 bonds, or AT1s, are issued by banks to
help them make up the capital buffers which regulators require
them to hold. They can be converted into equity but until they
are, they do not dilute a lender's share capital.
At Credit Suisse, whose main regulators are in Switzerland,
its AT1 prospectus made clear that holders would not recover any
value. Nevertheless, lawyers are talking to a number of AT1 bond
holders about possible legal action, law firm Quinn Emanuel
Urquhart & Sullivan has said. Law firm Pallas Partners also said
it and a Swiss counsel are working on possible legal action for
some Credit Suisse bond investors whose holdings were wiped out.
Swiss authorities also imposed curbs on bonus payments for
Credit Suisse employees, a move that penalises bankers after the
state-backed takeover.
($1 = 0.9280 Swiss franc)
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EXPLAINER-Credit Suisse: How did it get to a crisis point EXPLAINER-Why markets are in uproar over a risky bank bond known
as AT1 TIMELINE-How Credit Suisse has evolved over 167 years Credit Suisse, UBS deal: What you need to know GRAPHIC-Bank exposure Tale of two banks GRAPHIC-Bank deposits turn lower GRAPHIC-Majority of Americans oppose a bank bailout ANALYSIS-UBS swallows doomed Credit Suisse, casting shadow over
Switzerland GRAPHIC-SVB, Signature Bank are first bank failures since 2020 ANALYSIS-Asset concerns weigh on U.S. regional bank deal talks ANALYSIS-As worries over banks swirl, investors seek protection
against market crash NEWSMAKER-Ralph Hamers, the Dutchman thrust in the driver's seat
at Swiss bank UBS ANALYSIS-Credit Suisse rescue presents 'buyer beware' moment for
bank bondholders BREAKINGVIEWS-Switzerland takes CoCos to point of non-viability GRAPHIC-Credit Suisse rescue Over $95 billion in market value wiped out in 2 weeks ANALYSIS-Social media-driven bank runs burden regulators with a
bigger problem Traders bet on rate hike as fears of bank crisis ease Traders
bet on rate hike as fears of bank crisis ease ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Tatiana Bautzer, Saeed Azhar, Scott Murdoch, Tom
Westbrook, Shubham Batra, Amruta Khandekar, Ankika Biswas, Noel
Randewich and Francesco Canepa
Writing by Lincoln Feast, Alexander Smith and Deepa Babington
Editing by Sam Holmes, Catherine Evans and Matthew Lewis)
