Fearing the shadow of US SVB and Swiss Credit Suisse, bank stocks fell "unbearably"

Fearing the shadow of SVB of the US and Credit Suisse of Switzerland, bank stocks have fallen 'unbearably'. (Source: WSJ)

Most noticeable was the trading session on March 20, in the Hong Kong market (China), the stock prices of Standard Chartered and HSBC banks both fell more than 6% to the lowest level in more than two months. The MSCI index for financial stocks in Asia (excluding Japan) fell 1.3%.

Mike O'Rourke, chief strategist at Jones Trading, said that after the bankruptcy of Silicon Valley Bank (SVB) in the US for more than a week, the problem has not gone away, but instead has spread globally. The expert noted that UBS's acquisition of Credit Suisse could exacerbate Credit Suisse's problems when it moves to UBS. The merger deal would make the Swiss economy more dependent on a single lender.

Bank shares fell on Tuesday as the government- backed rescue of Credit Suisse raised fresh concerns about the banking sector.

Switzerland's largest bank UBS agreed to buy Credit Suisse for $3.25 billion on March 19. The decision came after Swiss authorities were prepared to change the law to skip a shareholder vote on the deal as the parties rushed to complete the deal by March 20 (local time). UBS took a loss of up to $5.4 billion on the acquisition of Credit Suisse.

Faced with the risk of a rapid loss of confidence in the financial system, major central banks on March 19 attempted to boost cash flows around the world with a series of coordinated currency swaps to ensure banks had the funds they needed to operate.

In an unprecedented global response since the outbreak of the Covid-19 pandemic, the US Federal Reserve joined central banks in Canada, the UK, Japan, the European Union (EU) and Switzerland in coordinating actions to boost market liquidity. The European Central Bank (ECB) said it would support eurozone banks with loans if needed, adding that the Swiss rescue of Credit Suisse was “instrumental” in restoring stability.

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