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Banking crisis: Reassurances, mistrust in institutions and the “cool banks”

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“The storm is not over yet, as Credit Suisse's stock plunge showed”

Τραπεζικor κρσ&eta ;: Οι καθησυχασμοΙ, η δυσπιστΙα σ ε θεσμοyς και οι «κουλ τρàπεζες»

Developments in the financial system with the collapse of Silicon Valley Bank and Signature Bank in the US inevitably have the lion's share of international media coverage these days. Answers are given to investors and the average citizen about the possibility of the problem becoming bigger, the mistrust towards the institutions is reflected and at the same time the causes are sought.

For the issue of investors' concern, that the failures of the two banks is a sign of trouble at other banks, the bbc article explains: “Given that most banks spread their exposure across many sectors, and also have plenty of cash on hand, the assessment is that the risk to the rest of the banking sector is low” .
To the average citizen's concern about whether their money is safe the article answers: “The US government has long guaranteed bank deposits under $250,000 – and if you're like most people, you probably don't have more than that in a bank account . SVB and Signature had a different set of clients: SVB largely served technology start-ups, while Signature Bank was a commercial bank focused on corporate clients. Many of these accounts had amounts exceeding this $250,000 level. However, measures taken by the US Treasury mean that even these customers will not lose their money.”

Credit Suisse

The German newspaper Frankfurter Allgemeine Zeitung commented on the developments, focusing also on the steep fall in the share of the Swiss bank Credit Suisse, which lost approximately 30% of its value in a few hours. “Credit Suisse's senior executives and supervisors must realize their share of responsibility,” comments the Frankfurter Allgemeine Zeitung. “After the turmoil around Silicon Valley Bank, politicians and financial regulators repeated over and over again that there was no risk of contagion and that the big banks were now much more resilient. But the storm is not over yet, as the fall in Credit Suisse stock showed. This time, a large bank is very much at risk, and which, due to strict capital and liquidity requirements, was considered sufficiently protected.” F.A.Z. he also estimates that “if the bank collapses, it could trigger a financial crisis like the one that followed the collapse of Lehman Brothers in 2008, given its size and importance in the capital market. Then the resilience of the banks will be put to a serious test”.

Mistrust of institutions

For its part, the economic newspaper handelsblatt points out that after the developments with Silicon Valley Bank, the conditions in the banking industry are worsening and distrust towards institutions is returning. “The case of Credit Suisse also proves this. Ammar Al Qudayri, chairman of Saudi National Bank, blamed Credit Suisse's stock for a fall after he said his bank, as a major shareholder, could not increase its stake in the Swiss financial institution even if it wanted to. , because regulatory reasons prevented it from doing so. The Saudi banker thus merely referred to something that is a fact. This failed to change the dramatic reaction from investors, with the development of the case a warning sign for all European banks, even if, in fact, they have nothing to do with Credit Suisse's problems.

< h3 class="bd_Title">Should we worry about a 'cool bank'?

The causes that led to the crisis are also mentioned by the international media, such as the Financial Times, underlining that the banking crisis showed why we should worry about a “cool bank”. With her article she focuses on the boss of Silicon Valley Bank, Greg Becker. “Bankers may be many – the list is as long as the sum of human traits – but can they ever be 'cool'? The fact that Silicon Valley Bank boss Greg Becker went out of his way to portray himself and his now-defunct bank as such should perhaps have been a red flag to the tech community he served, as well as regulators. . Asked in a 2019 podcast how he would describe his job at a party, Becker said he usually replied that he had the “coolest banking job in the whole world. I work with companies that are changing the world,'' he told his interviewer, who was also a customer and self-proclaimed 'fan', introducing SVB to his audience as 'the future of banking'. The article concludes: “It's tempting to downplay the risks of providing cheap bridge loans to startups before the next round of fundraising or IPO, when all things tech were so popular. But when interest rates started to rise and easy money stopped being available, the flaws in SVB's business model became apparent.”

Source: www.kathimerini.com.cy

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