The impact of Credit Suisse on Spanish banks
The fall of Silicon Valley Bank and the fear of the bankruptcy of Credit Suisse caused a stock market crash in Spanish banks. Banco Sabadell once again led the sharp falls in the Ibex-35, dropping 10.49% at the close of trading on Wednesday.
Credit Suisse shares jumped 40% at the opening of trading on Thursday 16 March, a record high, after the Swiss National Bank (SNB) pledged funding of up to 57 billion euros to bolster its liquidity amid the banking crisis. Credit Suisse chief executive Ulrich Koerner defends the bank’s health and says his bank’s liquidity base is very strong.
The Spanish stock market was quick to react and opened with gains of 1.92%, in a day that will remain pending what happens with Credit Suisse and the meeting of the European Central Bank (ECB), which is expected to raise interest rates by 50 basis points.
A day to forget on the Ibex-35
Yesterday, however, the banking sector spurred the red numbers of the Ibex-35 caused by the collapse of Silicon Valley Bank and Signature Bank and the fear of the bankruptcy of Credit Suisse. The Swiss financial institution recorded declines of more than 20% after the refusal of Saudi National Bank, its main shareholder, to provide more capital.
Banco Sabadell once again led the stock market plunge with a fall of 10.49%, more than 500 million euros of its capitalisation. The bank led by César González-Bueno was also the bank with the biggest losses after plunging 11.41% on the announcement of the Californian bank’s defeat.
A day marked by losses that were replicated in the other financial institutions: BBVA (-7.38%) was behind Banco Sabadell, followed by Bankinter (-6.94%), Banco Santander (-6.89%), CaixaBank (-6.72%) and Unicaja Banco (-5.33%). Santander and BBVA are the institutions with the least liquidity drawer in both the short and long term.
Guaranteeing customer deposits
The ECB has begun consultations with the main European banks to find out their exposure to Credit Suisse. The aim is to prevent systemic bankruptcy. In the case of Spanish banks, citizens have almost one trillion euros in deposits, while the Guarantee Fund could barely cover 1% of this amount.
For this reason, many of Silicon Valley Bank’s savers transferred their money to financial institutions with an EMI (Electronic Money Institution) operating licence, which cannot use their depositors’ money to cover the institution’s expenses and are regulated by each country’s central bank.
Moreover, these entities cannot offer or promote risky investments, so they may be safer than banks, especially investment banks. Simply because they are not in the business of borrowing and gambling on the stock and credit markets, a business which, as we have seen repeatedly, can be extremely risky.
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