The European Central Bank in Frankfurt am Main
Source: dpa-tmn/Arne Dedert
The markets viewed the rescue of Credit Suisse by UBS positively. US Federal Reserve Chairman Jerome Powell speaks of a step to support financial stability. In a joint action, the major central banks now want to improve the supply of dollars.
Dhe takeover of the Swiss bank Credit Suisse by the major bank UBS has met with approval from the heads of the major central banks and government officials. “We welcome today’s announcements by the Swiss authorities to support financial stability,” US Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell said in a joint statement. “The US banking system’s capital and liquidity positions are strong and the US financial system is resilient. We are in close contact with our international partners to support their implementation.”
The European Central Bank (ECB) also welcomed the “rapid action” of the Swiss authorities. European Central Bank President Christine Lagarde said the measures were “crucial to restore orderly market conditions and ensure financial stability”. The banking sector in the euro area is resilient and has strong capital and liquidity positions.
The Bank of England praised the “comprehensive package of measures unveiled by the Swiss authorities to support financial stability”. The UK banking system is well capitalized and funded and remains safe and sound.
Meanwhile, the European Central Bank, the US Federal Reserve and other major central banks announced a “coordinated measure” to ease dollar banking to calm financial markets. As the central banks involved announced on Sunday evening, so-called swap transactions are to be expanded from Monday, with which the central banks exchange currencies with each other. Central banks outside the USA should be better supplied with dollars.
In addition to the ECB and the Fed, the Swiss National Bank and the central banks of Great Britain, Canada and Japan are also involved. They reportedly agreed to increase the frequency of seven-day dollar currency swaps from weekly to daily.
Swaps are an important “liquidity hedge to ease tensions in global funding markets, thereby helping to mitigate the impact of such tensions on household and corporate credit,” the statement said. Daily operations are expected to continue until at least the end of April.
Relief in the financial markets
The major Swiss bank UBS had announced that it would take over struggling competitor Credit Suisse for three billion francs. UBS and Credit Suisse are among the 30 banks worldwide classified as “too big to fail” because their failure would have a devastating impact on the global economy.
Credit Suisse has come under further pressure following a series of previous scandals, including the closure of two US banks, Silicon Valley Bank and Signature Bank, which had worried the financial sector. Statements by Credit Suisse’s largest shareholder, the Saudi National Bank from Saudi Arabia, that it did not want to increase investments in the second-largest Swiss bank sent the price plummeting.
The financial markets initially reacted positively to the takeover of Credit Suisse on Monday. An early sign that risk appetite could pick up again was the rise in the euro, sterling and Australian dollar, data from trading platform EBS and Reuters Dealing showed. The cryptocurrency Bitcoin rose by more than five percent. S&P 500 futures rose 0.2 percent in choppy early trade in Asia. The Japanese yen remained stable.