Frankfurt The banking supervisory authority of the European Central Bank (ECB) has launched a survey of the largest European financial institutions about their commitment to Credit Suisse. This involves, for example, derivative transactions or financing, several people familiar with the topic told the Handelsblatt. The ECB declined to comment on this.
The financial regulator wanted to use the query, which was first reported by the Wall Street Journal, to get an overview of possible infection channels, insiders said. This is standard procedure in such situations. However, everyone involved was very tense. On Wednesday there was a very lively exchange between banks and their supervisory teams (JSTs), sometimes well into the evening hours.
The direct commitment of German banks to Credit Suisse is manageable, said a person familiar with the query. It is primarily about derivative transactions or business relationships in payment transactions. After all, Credit Suisse is not an institution that primarily finances itself through other banks.
Banks and regulators are more worried about possible second- and third-round effects than the direct exposure to Credit Suisse. “The biggest risk is further deterioration in market sentiment,” said the person familiar with the ECB query. “As we have seen, this applies to all banks.”
The shares of Deutsche Bank and Commerzbank had already come under pressure at the beginning of the week. Analysts attributed this to the increased uncertainty after the collapse of the Silicon Valley Bank (SVB), but also to the changed interest rate expectations.
After the latest developments in the USA, the markets are assuming that the ECB will raise interest rates less than expected. That would be bad for the big German banks, which benefit from higher interest rates.
Commerzbank shares are increasing
After the situation on the markets calmed down briefly on Tuesday, the shares of Deutsche Bank and Commerzbank each lost nine percent again on Wednesday in the wake of Credit Suisse. Credit Suisse shares had temporarily collapsed by 31 percent. The Swiss National Bank (SNB) then rushed to help the institute on Thursday night. Credit Suisse wants to take out a loan of up to 50 billion euros from her.
The situation on the markets then calmed down somewhat on Thursday. Deutsche Bank shares were almost unchanged in the early afternoon, while Commerzbank gained around two percent. In principle, however, banks and supervisory authorities are preparing for the fact that the markets will continue to be turbulent for some time – also because of the great geopolitical and monetary policy tensions.
>> Also read a comment on the topic: The Credit Suisse crisis is a special case, but that doesn’t make it any less threatening
Analysts, financial supervisors and politicians are not yet assuming that the bankruptcy of the SVB and the chaos at Credit Suisse will lead to major upheavals in the German banking market. Federal Minister of Finance Christian Linder said on Wednesday evening in the ARD program “Maischberger”: “The federal government is in constant and intensive exchange with everyone involved.”
With the Bafin you have an efficient financial supervision. “And we have the Bundesbank, which also has a tradition of stability policy,” said the FDP chairman. “We can therefore say very clearly: the German credit system – private banks, savings banks, cooperative institutes – is stable. And we will continue to ensure that.”
Bafin closely supports smaller institutes
The Bafin had previously stated that it currently sees “no direct risk of contagion from the problems of heavily technology-oriented American banks” for the German financial system.
The Silicon Valley Bank had sold bonds in a big way because it needed cash and suffered a loss of $1.8 billion because of the interest rate turnaround. When she tried to close this gap by raising capital, customers withdrew their deposits one after the other, causing the bank to collapse.
In Germany, savings banks and cooperative banks have also had to write down their own investments due to the turnaround in interest rates. However, these are only losses on paper, which the institutes can make up for in the coming years. They usually hold their bonds to maturity.
>> Read here: Savings banks write off almost eight billion euros on securities
Bafin expects banks to keep an eye on their interest rate risks and take countermeasures in good time. “Our main focus is currently on a few smaller banks with little surplus capital and increased interest rate risks – we closely support these institutions.”
The current developments in the USA show that the risks outlined by the Bafin could become reality. “So far it has been shown that the German banking system is robust and could digest the effects of the increased interest rates,” Bafin said. In principle, higher interest rates are good for the banking business, and the majority of institutions should benefit from this in the medium term.
More: Credit Suisse borrows up to CHF 50 billion from the Swiss National Bank.