The recent crisis in Credit Suisse, coupled with the failure of two US banks, has raised concerns about the spread of contagion throughout Europe's banking sector. According to a report from the Federal ReserveFederal Reserve and the European Central Bank ECB, at least two major banks in the region are looking at scenarios of contagion and looking for stronger signals of support from the Federal ReserveFederal Reserve and the European Central Bank ECB.
According to two senior executives with knowledge of the deliberations, these banks have held internal discussions on how soon the ECB should weigh in to highlight banks' resilience, particularly their capital and liquidity positions. There is a concern that making such statements prematurely could cause more panic and worsen the already existing panic.
The executives said that their banks and the sector as a whole are well-capitalised and have strong liquidity positions.
The failures of Silicon Valley Bank and Signature Bank in the United States sparked concerns in Europe, according to one of the executives. Neither the Fed nor the ECB have made any official comments on the matter.
The European Central Bank recently stuck with plans for a half-point rate rise to contain inflation, but it also stressed that it was monitoring market tensions. They stated that it would react as necessary to maintain price stability and financial stability in the currency bloc.
Credit Suisse's issues, one of the 30 globally significant banks, have the potential to cause a ripple effect throughout the financial system. The merger of the two banks could result in the loss of up to 10,000 jobs, as the regulators want a resolution to the crisis of confidence in Credit Suisse before markets reopen on Monday.