Monday, 20 March 2023


Bank lifelines ease global financial crisis fears By Reuters

Bank lifelines ease global financial crisis fears


© Reuters. Pedestrians pass a branch of First Republic Bank in Boston, Massachusetts, U.S., March 13, 2023. REUTERS/Brian Snyder


By Pete Schroeder and Scott Murdoch

(Reuters) – Multi-billion dollar lifelines for troubled U.S. and European banks shored up investor confidence on Friday and bolstered sentiment in battered stocks, although concerns now centre on whether a global financial crisis has been fully averted.

Large U.S. banks injected $30 billion in deposits into First Republic Bank (NYSE:) on Thursday, swooping in to rescue the lender caught up in a widening crisis triggered by the collapse of two other mid-size U.S. lenders over the past week.

The package came less than a day after Swiss bank Credit Suisse clinched an emergency central bank loan of up to $54 billion to shore up its liquidity, which went some way to calming panic about a global banking crisis.

On Friday, Asian stocks were mostly higher in morning trade, tracking Wall Street’s relief rally. First Republic Bank’s stock closed up 10% on news of the rescue but its shares fell 18% in after-market trading, after the bank said it would suspend its dividend. The stock is down more than 70% since March 6.

“I don’t think we are in the crux of a global financial crisis, balance sheets are much better than they were in 2008, banks are better regulated,” said Karen Jorritsma, head of Australian equities, RBC Capital Market. “But people are concerned that the contagion risk is real, and that rattles confidence.”

The European Central Bank pressed forward with a 50-basis-point rate hike on Thursday despite the financial markets turmoil, arguing that euro zone banks were resilient and that if anything, the move to higher rates should bolster their margins.

Focus now swings to the Federal Reserve’s policy decision next week and whether it will stick with its aggressive interest rate hikes as it seeks to get inflation under control.

In Asia, authorities in Singapore and Australia said they were monitoring financial markets but were confident local banks were well capitalised and able to withstand major shocks.

Banking stocks globally have been battered since Silicon Valley Bank collapsed last week due to bond-related losses that piled up when interest rates surged last year, raising questions about what else might be lurking in the wider banking system.

Within days, the market turmoil had ensnared Credit Suisse, forcing it to borrow from Switzerland’s central bank.

By Thursday,…

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