Yellen owes blanket deposit guarantee guarantee as US bank stocks plummet again

EU supervisor reconsiders bank liquidity

The rapid spread of the crises of confidence at Credit Suisse Group AG and Silicon Valley Bank are causing European banking regulators to think about how to deal with liquidity risks. Although there are no formal talks, some authorities on the ECB’s Supervisory Board would like to have a better idea of ​​what proportion of their deposits banks are likely to be able to hold onto in a crisis, according to people familiar with the situation.

After the financial crisis of 2008, liquidity standards were tightened around the world. But thanks to cellphone banking, depositors can transfer funds faster than they could a few years ago. In addition, the flow of information in social media increases the risk of bank runs. Bank deposits “are more sensitive to interest rate differentials and are more vulnerable to short-term movements,” José Manuel Campa, head of the European Banking Authority (Eba), told the European Parliament on Tuesday. “An additional pinch of uncertainty for financial stability can then reinforce a downward spiral.” Citigroup CEO Jane Fraser commented on the Silicon Valley bank at an event in Washington: “There were a few tweets and then the thing went under faster than ever history.”

One of the ways that supervisors could react is to change the liquidity coverage ratio. Currently, this requires them to hold more high-quality liquid assets than would outflow in 30 days under stressed conditions. The underlying calculations could be changed to make more conservative assumptions about the deduction of uninsured deposits, it said. In the US, the rules could be extended to smaller banks, to which they don’t currently apply. The Basel Committee on Banking Supervision, in which central banks and supervisors from all over the world exchange views, said on Thursday that the matter would be taken care of.

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