First Svb, then Credit Suisse: Roubini warns ECB and Fed
Nouriel Roubini warns Bce by Fed. On the day in which Credit Suisse sinks in the stock market and in which the fear of an event Lehman Brothers returns, a few days after the collapse of Silicon Valley Bank, Roubini warns in particular Christine Lagarde’s ECB which today, Thursday 16 March 2023, will announce its decision on rates.
“If the ECB raises rates by 50 basis points, it is possible that Credit Suisse will go bankrupt next weekend and that the ECB will be forced to turn around by next week.”reads the Twitter post of the economist also renamed Dr. Doom, best known for predicting the outbreak of the US housing bubble of 2008 and the consequent great global financial crisis.
“We therefore hope that (the ECB) does not repeat the mistake made in 2011 during the eurozone crisis, when he raised rates continued the economist, author of the libro MegaThreatslaunching a clear appeal to the Eurotower and the Swiss National Bank.
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After that tweet, the intervention of the Swiss central bank pro-Credit Suisse has arrived.
What will Christine Lagarde’s ECB do instead, already overwhelmed by a wave of controversy, for its obstinacy in raising rates in order to defeat inflation in the euro area, today?
First Silicon Valley Bank, then Credit Suisse. In both cases, two central banks rushing to avert the worst, respectively la Federal Reserve e la Swiss National Bankthe central bank of Switzerland.
Credit Suisse rescued by the Swiss central bank. What happens now?
The European markets thus recovered, just as Wall Street had recovered (but not immediately), after the series of announcements made last weekend by the US federal authorities, i.e. from Jerome Powell’s Fed, from the US Treasury led by the former Fed number one Janet Yellen andFDIC (Federal Deposit Insurance Corp), the Deposit Guarantee Authority, following the collapse of Silicon Valley Bank.
The news of the collapse of SVB – which brought the nightmare of the crac di Lehman Brothers and the global financial crisis, as well as the worldwide Great Recession that erupted in 2008 – triggered a repeated sell-off in bank stocks around the world, which came to a halt only in the Tuesday session on Wall Street, thanks also to the decision of several CEOs, including that of Charles Schwab, to demonstrate with deeds their trust in the banks they manage.
The bullish break however, it lasted the time of one session.
Just at the time when investors were beginning to realize that, after all, given the niche nature of SVB, it made no sense to compare Silicon Valley Bank e Lehman Brothers, the markets has exploded Credit Suisse bomb: a bomb that has led the ECB’s Supervision to turn on the spotlights on the banks of the euro area, to understand to what extent they are exposed to the troubles of the Swiss banking giant.
Woe that, at least on the stock exchange, where the Credit Suisse stock it had also sunk below the 2 Swiss franc mark for the first time in its history, they apparently returned today thanks to the move by the Swiss central bank Swiss National Bank (SBN), which took the field with the offer to provide additional liquidity to the Swiss giant recovering from years of scandals, investigations, alerts various, now under renovation. The offer was immediately accepted, with the Swiss bank announcing it would borrow from‘SNB up to 50 billion Swiss francs.
Not a few, far from it, so much so that, in the note “After SVB, Credit Suisse is also under pressure. Here comes the emergency liquidity from the SNB”, Luigi De Bellis, co-head of the Equita Research Officehe pointed out that “the amount of liquidity required is substantial when compared to the level of liquidity declared by the bank as of March 14 (LCR = 150%) and to the total amount of deposits (233 billion Swiss francs) and is reasonably aimed at guaranteeing customers on the institution’s ability to honor its commitments , avoiding a liquidity crisis which could manifest itself in the event of outflows of deposits (which fell in the fourth quarter of 2022 by 37% on a quarterly basis).
Commenting on the latest news on Credit Suisse, De Bellis added that “We believe the liquidity injection can be a measure of support in the short term, but it will hardly be sufficient to guarantee a solution to the bank’s problems (market confidence in the strategy/brand, complex restructuring) on which more incisive measures are needed”.
In short, the lifesaver launched by the Swiss National Bank at Credit Suisse is not certain guarantee of long life for the Swiss bank.
Roubini: too big to fail and too big to save
A bank that, as he clearly said the economist Nouriel Roubini yesterday, with a post on Twitter,
“it is too big to fail and too big to be saved”.
The Credit Suisse crisis has been defined by Roubini as a “Lehman moment” for European and global markets.
Among other things, the prophecies of Nouriel Roubini, also known as Dr Doomm have come true for the umpteenth time.
It was he himself who recalled on Twitter with a post what he had written on the social network just two days earlier:
As I wrote two days ago: ‘There is also the risk of global contagion, since a large European bank is currently very fragile and its financial condition is not entirely clear’. Roubini specified that his intention had certainly not been to unleash a new escape, so much so that in his previous post the name of Credit Suisse had not even been mentioned. “But now the risk is known and the contagion is already serious”.
In particular, as emerges from the tweet dated March 12, Nouriel Roubini expressed himself as follows:
“View the chaos caused by SVB the FOMC (the monetary policy arm of the Jerome Powell-led Fed) cannot raise rates by 50 basis points at its next meeting. I expect at most a squeeze of 25 basis points or even a pause based on the wait and see logic, to wait and see precisely what will happen on the financial markets“.
In the tweet Roubini then mentioned precisely the case “of the large, very fragile European banks”.