At least two major European banks are examining contagion scenarios in the region’s banking sector and expecting stronger signals of support from the Federal Reserve and the ECB, two senior executives familiar with the deliberations told Archyde.com.
The fallout from the crisis of confidence at Credit Suisse Group AG and the collapse of two U.S. banks could continue to reverberate through the financial system next week, the two executives told Archyde.com separately on Sunday.
Both banks held their own internal deliberations on when the European Central Bank should step in to underscore banks’ resilience, particularly their capital and liquidity positions, the people said.
A key point in those internal discussions is whether such statements could backfire on banks and stoke panic if made too soon, the people said.
Executives said their banks and the sector were well capitalized and liquidity was strong, but they fear the crisis of confidence could sweep away other creditors.
One of the leaders said the Federal Reserve could be the first to act, as the failures of Silicon Valley Bank and Signature Bank in the United States have triggered the same concerns in Europe. The ECB declined to comment. A Fed spokesman did not immediately comment.
On Thursday, the ECB maintained its plan to increase its interest rate by half a point to contain inflation. She stressed, however, that she was monitoring tensions in the markets and would react if necessary to preserve price stability and financial stability in the currency bloc.
As Credit Suisse is one of the world’s 30 systemically important banks, its problems could ripple throughout the financial system, industry executives said.
As regulators want a resolution to Credit Suisse’s crisis of confidence before markets reopen on Monday, a source has warned that talks with UBS Group AG are facing significant hurdles and that 10,000 jobs may have to be cut if the two banks are consolidating, Archyde.com reported.