While the issues involving Silicon Valley Bank (SVB) and Credit Suisse (CS) seem to be resolved, regulators are not ready to let go of the banking sector just yet. Klaas Knot, the Chairman of the Financial Stability Board of G20, announced today (Thursday) that the circumstances surrounding these institutions and the entire industry will be thoroughly scrutinized.
G20 to Investigate the Collapse of SVB and Credit Suisse
The Financial Stability Board primarily aims to investigate whether SVB and CS complied with the prevailing banking regulations and how they calculated their liquidity buffers.
SVB's problems began in March. Later that same month, following its collapse, it was sold to HSBC for a symbolic pound. Even though US regulators concluded that the institution's issue was not systemic, thus its negative impact spilled over to the European market. This was to such an extent that it drove the already struggling Credit Suisse to the brink of bankruptcy.
Credit Suisse could have collapsed if not for a takeover by takeover by UBS enforced by the Swiss government, which used tools introduced after the 2008 global financial crisis.
"This is not just a European issue; it's a problem in other parts of the world as well. Supervision on our side has clearly fared better than on the other side of the Atlantic," Knot commented during an event organized by the European Banking Federation.
As the representative of the Financial Stability Board and the Dutch central bank’s head, Knot maintains that it is crucial to scrutinize how American and Swiss authorities responded to the internal banking system crisis. In his opinion, it is high time to reconsider the liquidity coverage ratio, cash buffers, and other liquid instruments. Banks must maintain them to cope with short-term financing constraints.
"The level of economic uncertainty is now as high as it has been since the depths of the pandemic, with many fearing a repeat of the 2008 Global Financial Crisis," David Kindley, the Market Strategist at Orbex, commented.
Banking Crisis Shook the Broad Market
The issues of SVB and several other American banks not only led to the takeover of Credit Suisse in Europe but also a temporary crash in the shares of financial institutions around the world.
From its February peak, the NASDAQ Bank index has fallen 36%, and its twin index on Euronext lost almost 18% over the same period.
The biggest winner in this market uncertainty caused by failing banks turned out to be Bitcoin (BTC). It began March by testing the psychological support level of $20,000, only to reach its annual highs a month later, adding 70% to its value.
HSBC, the new owner of Silicon Valley Bank, seeks to distance itself from its 'dark past'. As a result, it will rename its UK division to HSBC Innovation Banking, representatives of the institution announced earlier this week. However, the question remains: is rebranding enough to conceal past mistakes?
Credit Suisse Returns Emergency Lifeline
Credit Suisse also repaid the emergency liquidity of the Swiss100 billion Swiss franc ($112.50 billion) loan it received as a lifeline from the Swisse government, the country's Finance Minister Karin Keller-Sutter confirmed.
"The federal guarantees, the 100 billion, have been repaid as of yesterday (Tuesday)," Keller-Sutter said.
Earlier, the Swiss lawmakers criticized the government's decision for offering the financial rescue package guarantee, and even voted against the move in the lower house of the Parliament. However, voting was symbolic, as lawmakers cannot overturn the state's commitment to the funds.
