2023-04-26 18:12:48
The scenario experienced by the First Republic Bank is reminiscent of that of the Silicon Valley Bank, which inflicted a shock on the entire banking system, including that of Switzerland, with the rescue of Credit Suisse.
But for Patrice Gautry, chief economist at the Private Banking Union, the scenario is not quite the same. “Here, the bank is still functioning. The problem is that it is trying to downsize its level of activity and rebalance its assets in relation to its deposits,” he explained on Wednesday in the Forum program. the RTS.
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Financial markets in panic?
For the moment, there is still no declared bankruptcy, but significant difficulties related to the business model of the bank, since it practiced relatively low interest rates to finance large real estate projects.
Until recently, Henry Paulson, former US Treasury, said that the “bank panic was far from over”. An opinion that does not entirely share Patrice Gautry. For the economist, there is no panic on the financial markets, the poor performance of the title on the stock market remaining “limited” to the Californian bank.
Stop the hemorrhage of deposits
The US bank’s share price has fallen about 90% in the past two weeks, showing a loss of investor confidence. But from what moment can we say that a bank is “doomed”? For Patrice Gautry, the bank is doomed from the moment there are leaks in deposits, with a loss of customer confidence. “Behind the resizing of the bank, there must be a real strategy,” he adds.
In his eyes, the model of the First Republic Bank is not therefore doomed. “If the bank succeeds in rebalancing its balance sheet by restoring a higher profitability than it had previously and by stopping the hemorrhage of deposits, it will be able to survive. But then there will be other aspects to take into consideration, such as that regulations and aid from regulators or the FED, for example”.
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Interview by Mehmet Gultas/hkr
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