Today, Saturday, Bloomberg News quoted Xuan Changning, deputy governor of the People’s Bank of China (central), as saying that the bank believes that the collapse of the Silicon Valley Bank (Silicon Valley SVB) shows that rapid shifts in monetary policy in advanced economies have serious implications for financial stability.
For his part, US President Joe Biden said yesterday that the banking crisis that followed the recent collapse of the “Silicon Valley” and “Signature” banks is receding.
Biden sought to reassure investors and depositors that the global banking system is safe, after financial stocks lost billions of dollars in value since the collapse of the two medium-sized US banks last week. And earlier this week, Biden pledged to his citizens that their deposits are safe.
And when the US president was asked if the banking crisis had subsided, Biden told reporters, “Yes.”
Financial stocks have lost billions of dollars in value since the crash last week.
California regulators shut down the Silicon Valley bank about a week ago and assigned jurisdiction over the bank to the Federal Deposit Insurance Corporation. It was the biggest collapse since the 2008 financial crisis.
SVB Financial Group, the bank’s parent company, said on Friday that it had filed for restructuring under Chapter 11 of the Bankruptcy Protection Act.
Major US banks poured $1 billion in deposits into First Republic Bank the day before to bail out the midsize bank, which had been swept into crisis by the collapse of Silicon Valley and Signature.
On the other hand, Biden called on Congress again to move to impose harsher penalties on senior bank executives, due to mismanagement and excessive risk.
“When banks fail because of mismanagement and excessive risk taking, it should be easy for regulators to obtain compensation from executives, impose civil penalties on them and prevent them from working in the banking sector again,” Biden said.
Talks to acquire Credit Suisse
Meanwhile, the Financial Times reported on Friday that UBS Group – the banking giant – is in talks to acquire Credit Suisse in whole or in part, and the boards of directors of Switzerland’s two largest banks are expected to meet separately early this week.
The report quoted – according to informed sources – that the Swiss National Bank (the central bank) and the country’s financial markets supervisory authority are organizing the talks in an attempt to restore confidence in the country’s banking sector.
He added that Swiss regulators had told their counterparts in the United States and Britain on Friday evening that the merger of the two banks was their “Plan A” to restore confidence in Credit Suisse.
The SNB’s focus is on agreeing a straightforward solution before markets open on Monday, the report said, adding that there is no guarantee that an agreement will be reached.
Bloomberg had reported Thursday that the “UBS” group and Credit Suisse oppose the compulsory merger, as the former prefers to focus on the private strategy that focuses on wealth management and is reluctant to take risks related to the smaller competitor.
Credit Suisse is the largest bank to fall victim to market turmoil in the wake of the collapse of the two American banks (Silicon Valley and Signature in New York), which forced the Swiss bank to borrow up to $54 billion from the “central” to support liquidity.
What about Goldman Sachs?
In the context, the office of US Representative Adam Schiff said on Friday that a group of Democratic lawmakers sent a letter to regulators and the Ministry of Justice requesting an investigation into the role of the Goldman Sachs group in the collapse of the Silicon Valley bank.
Schiff and 19 California congressmen directed the letter to Attorney General Merrick Garland, Securities and Exchange Commission Chairman Gary Gensler, and Federal Deposit Insurance Corporation President Martin Gruenberg.
“We wish to raise our concerns about the role of Goldman Sachs Group in advising Silicon Valley Bank and in purchasing its bond portfolio,” the letter said.
The lawmakers said in the letter that the Silicon Valley bank disclosed Goldman Sachs’ role as an acquirer of its bond portfolio on Tuesday, the last day of the four-business-day window the SEC provides for such disclosures.
“Given that Goldman Sachs would have benefited from the collapse of Silicon Valley Bank, we strongly urge you to analyze Goldman Sachs’ role as advisor to that bank,” the letter added.