Wednesday March 15, 2023 - 21:31:06 GMT
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How Will the Latest Banking Crisis (CS) Affect the ECB and the Fed?
I spoke to multiple sources in Europe about Credit Suisse 9cs0 and here is a summary of what they said:
The situation is not good but this has been this way for some time.
However, it is not as bad as the headlines suggested.
Specifically, it was the headline that the Saudi National Bank, the largest Credit Suisse shareholder, rules out more assistance to banks that triggered a broad global sell-off.
The issue seemed to be that the Saudis own 9.9% of CS and if it goes above 10% it would change the regulatory requirements.
A source in Switzerland said he believes there will be no government take-over. The government does not want to run a bank.
With that said the government is fully aware of the fallout from CS failure would have on the country’s reputation and its economy as banking is such a large component.
He seemed to think a government guarantee was imminent.
Later in the day, Swiss regulators indicated that CS can access liquidity from the Swiss National Bank if it was needed.
So, another day, another banking crisis but for now, if contagion is contained, it should shift attention back in monetary policy decisions from the ECB on Thursday and the Fed next week.
We always look for what would be a surprise as that is what moves markets. In this regard, logic says a 25bps hike seems most likely with no change or a 50bps hike triggering a bigger reaction although forward guidance will be watched closely as well. Note the ECB has sent a clear message that there would be a 50bps rate hike at the March meeting but recent events had made this a tougher call.
Jay Meisler
[email protected]
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