Financial leaders want to reassure on the solidity of banks

Words are always chosen with precision at the European Central Bank (ECB). This is why the institution announces “the convening this Friday of a surprise meeting” and not an emergency meeting, of the supervisory board to discuss stress and vulnerabilities in the banking sector after recent market volatility.

Bank stocks have been rocky this week, affected first by the bankruptcy of Silicon Valley Bank in the United States and then by the setbacks of Credit Suisse.

“The supervisory board is meeting to exchange views and take stock of recent developments in the banking sector,” the spokesman told Reuters.

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This meeting follows a similar meeting at the beginning of the week and comes the day after a rate hike of half a point.

A person familiar with the talks said the purpose of the meeting was to monitor liquidity in the eurozone banking sector and observe any vulnerability to a “bank run”, when customers withdraw their money en masse. ‘a bank.

The source added that he did not expect the ECB to take any action on this immediately.

Villeroy de Galhau strives to reassure

The priority of the European Central Bank (ECB) remains the fight against inflation, François Villeroy de Galhau said on Friday, the day after another sharp rate hike from the Frankfurt institution which thus sends a “message of confidence on the robustness of banks.

“We decided to do what we had said in advance, that is to say to raise the rates by 0.5%,” said the governor of the Banque de France and member of the Governing Council of the ECB on BFM Business.

“I think we have a message of confidence which is strong and which is twofold, it is both confidence in our anti-inflation strategy and in the solidity of European and French banks”, he added.

At the same time, we learned that First Republic Bank, victim of a crisis of confidence among investors and customers, will receive 30 billion dollars from several large American banks which are trying to avoid a domino effect after the bankruptcy of several banking establishments in last week.

As part of an unusual bailout that multiple sources say was orchestrated earlier this week by JPMorgan Chairman and CEO Jamie Dimon, Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell, 11 banks of Wall Street announced Thursday that they deposited 30 billion dollars in First Republic.

These include JPMorgan, Citigroup, Bank of America Corp, Wells Fargo, Goldman Sachs and Morgan Stanley.

The announcement allowed First Republic to close up 10% on Thursday on the New York Stock Exchange. But the stock fell 14.8% on Friday in out-of-hours trading on Wall Street as the bank declared a dividend suspension.

The bank also said it had a cash position of about $34 billion, not including the $30 billion injected, and that it had borrowed up to $109 billion from the Fed between on March 10 and 15 and an additional 10 billion from the Federal Home Loan Bank on March 9.

Investors were surprised by these late revelations and the fact that First Republic and other banks have leaned on the Fed this month for support.

According to data released by the Fed on Thursday, U.S. banks borrowed a record $152.85 billion from it in recent days, increasing the size of the central bank’s balance sheet after months of contraction.

The drop in the First Republic stock in the forecourt highlights the extent of investor nervousness, despite attempts by US and European authorities to restore confidence on a lasting basis.

Jason Ware, chief investment officer at Albion Financial Group, said the First Republic intervention was “a breath of fresh air for the system”, but probably more was needed. “It’s not important enough,” he said.

Founded in 1985 and based in San Francisco, First Republic held $212 billion in assets and $176.4 billion in deposits at the end of 2022, according to its annual report.

Its stock tumbled about 70% following the collapse of Silicon Valley Bank.

European stock markets confident at the opening

European stock markets continued their momentum on Friday at the opening, appeased by the financial support provided the day before to both Credit Suisse and the American bank First Republic, whose recent tremors have weakened the banking sector.

At the opening of the market, the Paris market advanced by 0.94%, Frankfurt by 0.91% and London by 0.98%, maintaining their renewed optimism from the day before after their plunge on Wednesday.