Status: 03/15/2023 1:25 p.m
Concerns about the bankruptcy of the Silicon Valley Bank are putting Europe’s stock exchanges under pressure, and financial stocks in particular are being sold off. Credit Suisse falls to a record low.
Before the interest rate decision by the European Central Bank (ECB), concerns about possible consequences of the bankruptcy of California’s Silicon Valley Bank (SVB) boiled up again on Europe’s stock exchanges. “The issues are not over yet,” said a dealer.
Once again, financial stocks in particular were sold from the portfolios. Commerzbank shares fell by more than nine percent at the top. Deutsche Bank was also one of the bottom performers in the Dax with a minus of around eight percent. The European banking index lost more than six percent.
Credit Suisse share price plummets
The papers of the crisis-ridden Credit Suisse are particularly affected. They collapsed by almost 24 percent to a record low of just under CHF 1.707. Investors fled after the Saudi major shareholder Saudi National Bank announced that it could not provide the major Swiss bank with any further money because regulatory reasons limited the stake to ten percent. At the same time, however, the major shareholder was convinced that Credit Suisse did not need any additional money. The Swiss National Bank (SNB) has declined to comment on the situation of the major bank after Credit Suisse’s share price crash.
Interest worries back
The rapid increase in interest rates has made it difficult for some companies to repay or service the loans they have taken out from banks. This has increased the risk of losses for lenders, while fears of a recession are circulating. In addition, the holdings of bonds on balance sheets have lost value due to the sharp hikes in interest rates by central banks, causing institutions to make losses if they sell the bonds before maturity.
After the collapse of the SVB and another US bank last week, regulators and financial managers around the world scrambled to allay fears of contagion. However, concerns about smaller institutes in particular persisted.
How are the central banks reacting?
At the same time, concerns about interest rates put the stock markets under renewed pressure. According to an insider, despite the recent turbulence in the banking sector, the monetary watchdogs of the ECB are tending to stick to the planned large interest rate hike of half a percentage point. Because the ECB assumes that inflation will remain too high in the coming years, as an insider reported to the news agency Reuters.
After the bankruptcy of the SVB, doubts arose about the ECB’s determination to raise interest rates again. “However, it is unlikely that the ECB will be dissuaded by the US bank failures,” said Thomas Altmann, portfolio manager at asset manager QC Partners.