A bad memory that reminds us: in 2008, a banking and financial crisis born in the United States spread on a global scale. The failure of several US regional banks last week, including Silicon Valley Bank (SVB), caused turmoil in French financial markets. Especially since it was followed by the very bad patch experienced by Credit Suisse, one of the largest European banks, which experienced the worst session in its history on the stock market on Wednesday (-24.24% at the close ).
The Paris Stock Exchange also fell by 3.58% on Wednesday. Victims of a domino effect, European banking stocks (including Société Générale, BNP Paribas, Crédit Agricole) collapsed by more than 10%. 20 minutes takes stock of the fears of contagion on the French banking system and its defense capabilities today compared to 2008.
Could Credit Suisse go bankrupt?
“The difficulties of Credit Suisse are not surprising, because its leaders have made risky choices for several years,” explains Norbert Gaillard, economist and independent consultant. This institution is one of thirty global banks considered too big to fail. Hence the decision of the Swiss Central Bank to come to its rescue on Wednesday evening by making available up to 50 billion Swiss francs (50.8 billion euros) to strengthen its liquidity.
Markets were visibly reassured, as the bank’s stock rebounded 32% at the open on Thursday morning. It closed the session up 19.15%. “We took the problem to the root, this decision should be enough to get Credit Suisse out of business. Especially since its managers are planning a complete reorganization of the company,” says Norbert Gaillard.
What links do French banks have with Credit Suisse?
“There are links due to the operations on the financial markets, which make each bank both the creditor and the debtor of the other. Hence a strong interdependence”, stresses Norbert Gaillard. This explains why we cannot leave an establishment like Credit Suisse in difficulty for very long, at the risk of contagion. It is this same interdependence that led many establishments into turmoil in 2008, with the crisis in subprime as a detonator.
Is the state of health of French banks better than in 2008?
Their 2022 results were good. “And compared to 2008, their configuration has changed. BNP, Crédit Agricole and Société Générale have a less risky profile, because at the time, there were a lot of investments in real estate, which had weighed them down during the crisis. It weighs much less in the balance today, ”said Norbert Gaillard.
Another reassuring point, according to the economist: “The rather good solvency of French households, due to the fact that the banks open the floodgates of credit less than a few years ago. In addition, unemployment has dropped significantly in recent years, and this should continue due to the retirement of the baby boom generation. »
What guarantees have been in place since 2008?
International regulation has been strengthened since the 2008 crisis. The Basel agreements have reinforced banks’ capital requirements to guarantee their solvency in the face of any losses they may incur. Liquidity ratio rules have also been put in place. “In addition, the supervision of banks by the ECB is stricter than in 2008. The latter is much more on the alert than at the time, because it has more experience in crisis management.
States themselves are more experienced in crisis management and how to avoid contagion. They crossed that of subprime, as we have said, but also that of the Greek debt, of Covid-19”, underlines Norbert Gaillard. Large-scale “stress tests” (bank resistance tests) have also been multiplied since 2008. These are exercises simulating extreme financial crises, making it possible to assess the resilience of banks.
Are the French sensitive to what is happening on the financial markets, and do they tend to withdraw their balls in the event of banking turbulence?
The fear of French banks is to find themselves in difficulty if their customers withdraw their funds in the event of a general panic. But according to Norbert Gaillard, “the French have confidence in the banking system, as shown in particular by the record collection in January of the livret A, even though the international situation is complex”.
The economist also underlines one of the French specificities: “A good part of the cash of the big banks is with the ECB. Which is reassuring if cash needs to be mobilized quickly. There is no risk of rapid asset sales that would not be optimal”.
What amounts are guaranteed for bank customers?
In France, it is the Deposit and Resolution Guarantee Fund (FGDR) which guarantees sight deposits up to 100,000 euros per account (current accounts, other accounts and passbook savings plans) in less than 7 working days. The FGDR also reimburses passbooks guaranteed by the State: Livret A, popular savings passbook, sustainable and solidarity development passbook, again within a maximum period of 7 working days and up to a limit of 100,000 euros per customer.
Is the rebound in European stock markets on Thursday reassuring?
European stock markets rebounded after their fall on Wednesday, somewhat reassured by the confidence shown by the European Central Bank in the health of the sector. Paris thus took 2.03% on Thursday. “This crisis should eventually pass,” said Norbert Gaillard.
The ECB raised its rates by 0.5 points. Is this a good sign?
The European Central Bank did not let itself be frightened by the risk of a new banking crisis and decided on Thursday for a new rate hike of 0.5%, in order to fight inflation. The banking sector “is currently in a much stronger position than in 2008,” explained Christine Lagarde to the press. “We are closely monitoring market tensions and remain ready to react,” she continued. “It’s a good decision, because it means that we have increased the rates in line with the level of inflation, without taking into account what is happening on the markets”, comments Norbert Gaillard.