2023-05-04 17:38:58
It is not clear yet, the final form of the rescue operation of the American “First Republic” bank, at a time when questions are still hovering about the final completion of the rescue deal for Credit Suisse, by the Swiss “USB” bank. The truth is that the financial authorities in both Switzerland and the United States managed to contain a banking crisis that included several banks several weeks ago, but the matter is still in danger, especially due to the exposure of banks and financial institutions to troubled banks. The crisis that spread fear in the global banking sector in March is reminiscent of the one that struck the world in 2008, and led to the generation of the largest global economic crisis in modern history.
The American First Republic Bank is under more pressure, which has been evident in the past few days, with market losses amounting to $22.1 billion, or nearly 97 percent of its total market capitalization. This means that the issue will continue to interact until an entity is found that can save this bank and its shareholders. With the need to point out that US President Joe Biden had announced with the onset of the banking crisis that it is not possible to compensate the shareholders of troubled banks, but the depositors’ money will be safe and its owners are free to withdraw it at any time. This decision calmed the atmosphere of the social aspect of the crisis, but it escalated it in terms of reaching final solutions, which also ensured that the local banking sector in general would not be affected by it.
The major problem in the crisis of a bank or financial institution lies primarily in the extent of exposure to it from various sides. Asset management funds are among the largest shareholders in the First Republic, as well as in other US banks that have faced defaults in the recent period. And an institution such as “Black Rock”, the giant in asset management, is one of the parties that owns assets in this bank. This means that entities associated with asset management funds face more risk on their investments, including funds invested individually. But it seems that there is a rescue coming on the way, through the company “JP Morgan Chase”, while the US banking arena is waiting specifically for the form of this deal, which is believed to have reached its final stages. The most important thing in such a deal is that the “rescuer” party will take over all assets, including uninsured deposits.
However, this will not remove the tension in the domestic and foreign banking arena, with some “unsupported” expectations that there are banks that are actually facing defaults, or difficulties. Which means that this arena will remain turbulent for a period that will not be short. Many questions arise about the issue of bank defaults in general, especially with regard to rescue operations. It is not easy to find parties that accept the acquisition of a financial institution that is bound to inevitably fall, and this means the need for government intervention, which at the present time is difficult for the Biden administration to market politically, in light of the difficulties facing the economy in general. While there are rising voices on the part of American voters against pumping their money as taxpayers, into banks that failed due to bad management.
In any case, the disturbances left by the wave of bank defaults in both the United States and Switzerland will remain on the scene with a profound impact, until the issues of acquisition and rescue are completely resolved. The scene is still hazy, and casts a shadow over the general activity in the banking sector as a whole.
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