Will a financial crisis follow the bank quake?

Dusseldorf The bankruptcy of the Silicon Valley Bank and the New York Signature Bank was followed by the next banking earthquake with the takeover of Credit Suisse by UBS. In view of these developments, we asked the Handelsblatt readers for their perspective on the situation.

One reader writes: “Confidence in the banks is eroding – it is the fear of another financial crisis that is spreading.” There is disagreement in the letters as to whether the takeover of Credit Suisse by UBS will help to calm the situation. One reader thinks the action has “calmed the markets down a bit”. “We will see how long the half-life of this reassurance is when the next global banking fire is lit,” he continues. Another reader believes that the “declarations of confidence from governments and central banks are particularly important”.

According to one reader, one of the reasons for the crisis at Credit Suisse is that it has “gambled away its reputation over the past few years as a result of a series of scandals”. Another reader mentions the “high liquidity outflows”: “If the ‘swarm intelligence’ of the markets acts like this, no bank can survive it, no matter how healthy it is and what the regulatory framework is.”

One reader finds that the efforts of the central banks and governments since 2008 to “tame” the banks “have been tackled seriously and, at least in Europe, quite consistently”. But even these control measures have their limits.

Other readers, on the other hand, find that the right conclusions have not been drawn. Some criticize the bonus culture in the banking industry in particular. “As long as bankers think in terms of bonuses, there will always be man-made misconduct, deliberately wrong management decisions,” writes one reader.

We have put together a selection for you from the letters from the Handelsblatt readers.

There is no peace

“Almost 15 years after the Lehman Brothers bankruptcy, our financial system does not seem any less vulnerable to crises. Banks have to be rescued again and risks are shifted onto companies again.

Confidence in the banks is eroding – it is the fear of another financial crisis that is spreading. Governments and central banks did not draw the right conclusions from the last financial crisis. With the takeover of Credit Suisse by UBS, there will be no peace.”
Horst Schilling

Troubled by the swarm

“Credit Suisse’s problem wasn’t capital, it was in good shape in that respect. Rather, the high liquidity outflows have led to the situation. When the ‘swarm intelligence’ of the markets acts like this, no bank can survive, no matter how healthy it is and what the regulatory framework is.

The question now is whether it will be possible to calm down the market players. That is why the declarations of confidence by governments and central banks are important – it remains to be seen when they will be sufficiently believed.”
Andreas Theuer

Hope it goes well!

“The ‘handover campaign’ – as I would rather call it – from Credit Suisse to UBS has apparently calmed the markets somewhat. We will see how long the half-life of this reassurance is when the next global bank fire is lit. The efforts of the central banks and governments since 2008 to ‘tame’ the banks have certainly been tackled seriously and, at least in Europe, quite consistently.

The fact that such control measures have their limits is shown by the exorbitant inferiority of the Swiss state in the negotiations with UBS and also the fact that regulation can only be thought of globally and made uniform in order to work, but this – we are only looking at Europe and the USA – is not the case.

We are moving in the current interest and economic environment, garnished with a towering debt of numerous states and companies, in which more money is needed than banks can hold. Hopefully – beyond reason – it goes well.”
Matthew Ulfkotte

>> Read about this: “Too big to fail” – The return of the banking problems scares politicians

A “self-fulfilling prophecy”?

“Can one really accuse the banking world of being the sole loser and of not having learned anything from the financial crisis of 2008/2009? Wasn’t it the central banks that have been flooding the capital markets with fresh and new money ever since? And thus fueled the capital markets and big banks to take more and greater investment risks in the run and competition? The risks of this flood of liquidity and how to catch it again has been pointed out for years, ‘now’ it poses problems for everyone involved and is becoming a danger! Couldn’t one also speak of a ‘self-fulfilling prophecy’?”
Richard Rainer

carelessness, cockiness and greed

“In the end, who will pay for the carelessness, high spirits and greed of the bankers? In fact, there is no need to ask this question at all!”
Bernhard Derdzinski

Blind Overseers

“In times of great accumulation of money
the wise man takes precautions
for the time that comes after
since this often brings trouble …

Well, there seem to be shockingly few of these clever ones in some systemically important investment institutions, if we remember, for example, how the 100-year Austrian bond from 2020 with a nominal coupon of 0.85 percent was snatched from the hands of the local finance minister . The paper is bobbing – what a surprise – today at just over 40 percent. But where a systemically important player is allowed to act like that, a blind overseer can’t be far away… and that’s where the real problem lies!”
Oliver Dange

>> Read about this: How it came to the deep fall of Credit Suisse

keep risk manageable

“The stabilization of Credit Suisse by the Swiss National Bank was the only feasible step to prevent a crisis like Lehman. There are always winners and losers.

But the question remains once again: Do you trust a system misguided by politicians and central banks that allows its top staff indescribable self-enrichment?

However, greed is in human DNA. Everyone, absolutely everyone, has watched Credit Suisse go about its business for years. And this is where the starting point for improvement must lie. Controlling should not determine the company’s policy, but it must emerge stronger from this renewed crisis. This means, for example, banning short sales worldwide.

This means that before the financial jugglers at the top of the institutes are paid unimaginable salaries with bonus payments, and are also protected against the risks by private insurance (the company pays the premium), such excesses will occur again and again.

If you guarantee the customer a return well above the usual bank interest rate in ‘wealth management’, you have to take risks, otherwise it won’t work. And an old farmer’s rule says: Risk also means there will be losers, but the risk should remain manageable and understandable. The state must therefore set framework conditions.

It pains me, as a staunch supporter of the free market economy, to have to say this, but unfortunately there seems to be no other way.”
Joachim Popp

Reputation lost

“I think there are two fundamentally different things going on here: The management of the Silicon Valley Bank (SVB) made elementary mistakes through mismatch transactions that no banker should actually make anymore these days. And the American financial regulator exempted medium-sized banks like SVB from post-financial crisis regulations at the time, allowing SVB to operate virtually under the radar screen! And why could an ex-Lehman banker get such an exposed position in a bank again!? Did the banking regulator sleep or turn a blind eye?

Credit Suisse, on the other hand, has lost its reputation over the past few years as a result of a series of scandals, and now, triggered by SVB, it has cost it its head and neck!

Some Swiss banks are still hiding behind their banking secrecy and seem legitimate to do ‘shady’ business.

However, we do not need new EU regulations for banks now!”
Christian Nagele

structural problems

“As long as bankers think in terms of bonuses, there will always be man-made misconduct, deliberately wrong management decisions. As long as there are comfortable supervisory boards, which may also be foreign to the industry, there will be approved bonuses. As long as there are target agreements, the achievement of which is sanctioned with bonuses, there will be corrupt bankers.”
Utah Hubmann

Less learned from the crises

“For me, the banks have learned very little from the previous crises. Risk appetite remains unreasonably high. But the results prove them right. Profits are distributed to shareholders, losses to customers.

This two-class society does not serve to act conscientiously. Especially the individual, as the weakest link, does not enjoy any protection – which is particularly worrying, since it is not a matter of deposits and investments, but of the ‘small’ savings for everyday life.”
Tony May

“Seat belt” for state and citizens

“With the bankruptcy of Silicon Valley Bank, fundamentally real risks in trying to create something new for this world are affected – through the financing of start-ups and investments particularly in US Treasuries by the bank.

Credit Suisse, on the other hand, is also an investment gamble – that’s something completely different. Therefore, perhaps the most important thing would be to separate real economic movements from investment gambles.

Banks that then gamble like in a casino must know that losses from this will no longer be absorbed by the state. Then the bank regulations could contain minimum and maximum ratios of equity cover and ‘maximum use of play money’.

That would then be very rigid but easily manageable banking regulation with a ‘seat belt’ for the state and citizens.”
Michael Langenberger

If you would like to have your say on this topic in the Handelsblatt, write us a comment, either by e-mail [email protected] or on Instagram at @handelsblatt.

More: Last week, Handelsblatt readers debated whether it is right that Finance Minister Christian Lindner is insisting on compliance with the debt brake.