Banking System | Weekly Statement March 20

Are we experiencing the collapse of the Banking System or is it simply a post pandemic crisis? Several banks, including Silicon Valley Bank and Credit Suisse had to be intervened by their respective governments. The most recent, First Republican Bank was bailed out by a set of 11 other banks with a total debt of $30 billion. All of this resulting in another negative week for the S&P 500 and Dow Jones. 

First Republic Bank experienced a decline of 33%

After announcing the suspension of its dividend and the receipt of $30 billion in unsecured deposits from major Wall Street institutions, First Republic Bank experienced a 33% decline. First Republic, which has lost 72% of its value this week despite the stock helping to stabilize its liquidity, would struggle to produce earnings due to higher interest payments on past loans.

Due to the recent crashes in the banking system, some market participants questioned whether the president Christine Lagarde would go ahead with the decision mentioned in February. In intraday trading on Wednesday, the shares of Credit Suisse fell by as much as 30%, while the entire banking industry ended the day down nearly 7%.

With inflation in the area still well above the target level, the ECB had been indicating for several weeks that it would raise rates once again at its March meeting. According to early figures, headline inflation in February was 8.51GDP3T, significantly above the central bank's target of 21GDP3T.

The European Central Bank

Finally, the European Central Bank on Thursday announced a new rate hike of 50 basis pointsHe also indicated that it is prepared to provide liquidity to banks that request it.