![]() ![]() banks were exempt from that rule Silicon Valley was one of them.Īll that hasn’t kept the U.S. Those sweeping banking reforms enacted by the European Union forced banks to hold thicker financial cushions against losses and put the biggest banks under the watchful eye of the ECB, taking them away from national supervisors who were considered to have turned a blind eye as problems built up at their home banks.Įuropean banks also observe international rules that raised the amount of ready cash they had to keep on hand to cover deposits. investment bank Lehman Brothers in 2008 and led to 600 billion euros ($637 billion) in taxpayer-funded bailouts of European banks in 2008-2012. Since then, expectations shifted back toward a quarter-point.Įuropean finance ministers have said their banking system has no direct exposure to the failures of Silicon Valley Bank and others in the U.S.Īnalysts say the European banking system instituted wide-ranging safeguards after the global financial crisis that followed the collapse of U.S. Federal Reserve will do at its meeting next week.įed Chair Jerome Powell said only last week that the ultimate level for rates would be “higher than previously anticipated,” leading some analysts to predict the Fed would raise by a half-point after slowing the pace to a quarter-point in February. Similar questions are being raised about what the U.S. “If the panic eases, the ECB is likely to resume tightening before long” with more increases. “Markets are assuming that this may be the ECB’s last rate hike, but the reality is that developments in the banking sector could shift either way in coming weeks,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. She did not commit either way, unlike her stance before Thursday’s meeting when she said a rate increase was “very likely.” Bank shares recovered Thursday.Īnalysts say the share selloff was fed by investor fear that banks took added risks to increase investment returns during years of very low interest rates and some may have failed to safeguard themselves against those holdings turning sour as rates rose.Īs for more rate hikes in Europe, Lagarde said “inflation is projected to remain too high for too long” and that further increases will be based on what the numbers show. The troubles at Credit Suisse dragged down the shares of stalwart European lenders such as Deutsche Bank, BNP Paribas and Societe General on Wednesday. Then, globally connected Swiss bank Credit Suisse saw its shares plunge this week and had to turn to the Swiss central bank for emergency credit. going under last week after suffering losses on government-backed bonds that fell in value due to rising interest rates. Their message follows Silicon Valley Bank in the U.S.
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