For the second time in four days, regulators have ridden in to rescue markets. But the reaction of the ASX to the latest package shows broad fears.
It’s probably fitting that the Swiss National Bank is doing an impression of a Swiss army knife as it rushes in to help Credit Suisse through the extraordinary crisis thatJust like a Swiss army knife, the SNB is showing it has plenty of tools at its disposal to soothe fearful markets.First, it deployed a statement of support for, and confidence in, Credit Suisse’s liquidity and capital position.
Credit Suisse shares have been under pressure for months as investors weighed myriad profitability problems and questioned whether its multi-year restructure would work.explicitly ruled out providing the group with further support, saying it did not want to breach shareholding caps. While the local banking sector could claim it had no direct exposure to Silicon Valley Bank, that’s unlikely to be the case with Credit Suisse. As economist Nouriel Roubini points out, this is a global giant, with tentacles throughout the global banking sector and indeed the global economy.“Anything that happens to Credit Suisse will be of systemic effect for not just the European financial system, but also for the global financial system,” he told Bloomberg.
This suggests a broader worry that turmoil in the banking sector will lead to tighter credit conditions, which will likely weigh on global economic growth.The speed with which the central bank acted, which cameof the collapsed Silicon Valley Bank, suggests markets have quickly slipped back into the old GFC rhythm: for all the hue and cry for free markets and deregulation, investors almost seem to expect regulators and governments to intervene as quickly as possible when bad stuff happens.
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