Global banks lose US$ 500 billion in market crisis – 03/17/2023 – Market

Global banks lose US$ 500 billion in market crisis – 03/17/2023 – Market


Investors wiped nearly $500 billion off the value of bank shares around the world in the financial sector’s worst meltdown since the start of the Covid-19 pandemic.

Financial stocks plummeted this week as the fallout from the Silicon Valley Bank (SVB) collapse rippled across global markets. Banks in the United States, Europe and Japan have collectively lost $459 billion in market value so far this month — the 16% drop is the steepest since March 2020.

The heaviest losses were in the US, where the KBW Bank Index lost 18% in March. Europe’s Stoxx 600 banking index fell 15%, while Japan’s Topix banking sector lost 9%.

Efforts to stabilize the financial system and avoid a wider panic have met with only partial success. Shares in troubled California bank First Republic fell more than a quarter in Friday afternoon trading despite a $30 billion cash infusion from Wall Street banks including JPMorgan Chase and Goldman Sachs.

Shares in Credit Suisse fell 8% even after the provision on Thursday of a CHF50 billion ($54 billion) emergency credit line from the Swiss central bank. The Zurich-based lender’s default swaps and bonds were trading at troubled levels.

Market volatility hurt even the strongest banks, with some hurt by yields on two-year US Treasuries falling at their fastest pace since 1987. Goldman lost about $200 million on its trading desk that deals with interest rate products, according to people familiar with the matter. Goldman declined to comment.

Global regulators held talks late on Friday to discuss how to allay fears about the health of the financial system, with some focusing on options to stabilize Credit Suisse and its international subsidiaries.

Executives and members of the Swiss lender’s board are also debating the future of the 167-year-old bank, which for years has bounced from one crisis to another.

“Clearly, we have to revise the strategic plan,” said a person involved in the emergency talks. “It’s been a crazy week. We’re looking at everything that can be done. There’s nothing that’s taboo. But whatever happens, the bank will survive.”

Another senior creditor figure said they needed to “reflect on the various contingency options we have.” “We have a good strategy but there is a question now whether market conditions and investor support will allow it to work.”

Options under consideration include breaking up the bank and raising funds through a public offering of its Swiss division, with the wealth and asset management units being sold, the two people said. This would likely be to rival UBS because the government and regulators would prefer them to remain under Swiss control.

Adding to the pressure on management, one of the bank’s biggest shareholders is now publicly calling for the separation of the domestic unit to protect depositors, mortgages and small businesses.

“Drastic action is needed. There needs to be a complete spin-off of the Swiss branch. We need to isolate it now because the contagion is spreading to it,” said Vincent Kaufmann, chief executive of the Ethos Foundation, which represents pension funds. Swiss and institutions holding up to 5% of the shares.

Credit Suisse’s sheltered home bank is worth up to twice the group’s entire market capitalization, according to analyst estimates.

“The SNB [Swiss National Bank] needs to step in,” added Kaufmann. “I’ve had some calls from Swiss pension funds who are very concerned about their exposure and are reducing it.”

Other proposals to be considered over the weekend include accelerating cuts at the investment bank or even closing it entirely, the sources add.

Translated by Luiz Roberto M. Gonçalves



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