After several years of drills, the European Central Bank (ECB) and the eurozone financial system received a fire alert yesterday. The fire comes from Credit Suisse, which collapsed on the stock market after losing the support of its main shareholder, and spread through the listings of the main European banks. The Swiss entity has asked its central bank for help (54,000 million dollars), which last night offered to lend liquidity, and the ECB is already working with euro zone entities to gauge the scope of the crisis, which comes days after that of Silicon Valley Bank (SVB) on the other side of the Atlantic.
The ghosts of the past returned yesterday when the president of the Saudi National Bank (SNB), Ammar Al Khudairy, assured in an interview with Bloomberg TV that his bank will not inject more money into Credit Suisse “for many reasons”. SNB became last year, with 9.9% of the capital, the first shareholder of the Swiss bank, after going to the capital increase aimed at straightening out the business.
Yesterday's message was a way of letting the bank fall, at a time of particular uncertainty after SVB's intervention in the United States. Stocks lost close to 30% and ended the day down 24%. The bank left 2,300 million euros in value in one day, but the problem was that it dragged down the entire sector in Europe.
Losses spread, with moments of panic that led to the timely suspension of trading of some entities. The contagion affected all the large European banks, with falls of 12% for Société Générale, 10% for BNP Paribas, 9.2% for Deutsche Bank or 8.7% for Commerbank. The German reference index, the Dax, fell 3.27%, compared to 3.5% for the French, the CAC 40. In Spain, the Ibex fell 4.3%, with declines in all the large banks. Sabadell fell 10.4%, BBVA 9.6%, Santander 6.8%, CaixaBank 6.8% and Bankinter 6.4%.
The fire also reached the bond markets, where a more lax ECB policy is beginning to be discounted with interest rate hikes, and was primed with Credit Suisse's own default insurance, the CDS, which exceeded 800 points, which which in financial terms is equivalent to assigning it a bankruptcy risk similar to that of Greece at the worst moments of the financial crisis.
Credit Suisse also has bonds issued for 41.8 billion euros and, once again, the market is betting that it will have a hard time repaying them. Yesterday they were traded at heavy discounts.
The bank asked the Swiss National Bank for help and found an answer: liquidity will be provided "if necessary."
Meanwhile, the European Central Bank (ECB) has begun to contact the European banks that it supervises and does not stop asking for prudence to know its exposure to the convalescent entity. The Bank of Spain is taking charge of these efforts at the local level.
In the United States, the Treasury Department has also gotten to work and is reviewing the exposure of national banks to Credit Suisse. The bank is part of those considered systemic at a global level and yesterday analysts returned to the debate on whether it is too big to fail.
Speculation revolved around options such as a merger with UBS or asset sales. Morningstar analysts distributed a note in which they considered that the bank should undertake a new capital increase or be spun off.
The ECB will make a decision on interest rates today and, despite the fact that a half-point rise is expected, up to 3.5%, the eye is set on the message about future reviews and the soundness of European banks .
The crisis is not only from the Swiss bank, but it continues to feed on the messages that come from the United States. A report from Pimco yesterday regarded a recession in the country as probable and another from Lazard emphasized the sensitivity of the markets to any banking problem.
As if that were not enough, one of the most influential financial sector executives in the United States, Larry Fink, the chief executive of Blackrock, openly said that the country's banking sector is at risk. It is “the price of easy money”, he asserted.
There was even the prophet of all apocalypses, the economist Nouriel Roubini, known as Doctor Doom, who yesterday was true to his style and warned of the "problem that Credit Suisse could be too big to be saved."
In Spain, analysts trust the solvency of the entities, but do not hide their concern. "All of this is a bit dizzying," says Juan Torras, a finance professor at EADA Business School, before warning that, despite reputational problems, Credit Suisse "is a healthy bank."
Nuria Álvarez, an analyst at Renta 4 Banco, describes the stock market punishment of European banks as "excessive", which "is in question" and which must now demonstrate the proper functioning of the supervision mechanisms. The collapse in the stock market may be partly due to the fact that banks "accumulate very strong revaluations" with the rise in interest rates and "many investors are taking advantage to make capital gains".
Diego Morín, an analyst at IG, agrees with the growing pressure on the ECB to slow down its policy of raising interest rates. "Investors are sending a message to central banks in their aggressive interest rate policies," he says.
Juan Abellán, director of the IEB's Master's in Financial Markets and Asset Management, believes that "Spanish and European banks are well established."