At least two major banks in Europe are examining scenarios of possible contagion in the region’s banking sector and expect the Federal Reserve and the European Central Bank to step in with stronger signals of support. This has been confirmed to Reuters two senior executives familiar with the deliberations.
Fallout from the crisis of confidence at Credit Suisse and the failure of Silicon Valley Bank and Signature Bank in the US could continue to ripple through the financial system next week, both executives told Reuters separately on Sunday.
The two banks have held their own internal deliberations about when the ECB should intervene to highlight the banks’ resilience, specifically their capital and liquidity positions, the people said.
A key point of these internal discussions is whether such statements could backfire and further fuel panic if done too soon, the people said.
The executives said their banks and the sector are well capitalized and liquidity is strong, but they fear the crisis of confidence will spread to more lenders.
One of the executives said the Fed may have to act first as the failures of Silicon Valley Bank and Signature Bank in the United States triggered concerns in Europe.
The ECB declined to comment. A Fed spokesman also had no immediate comment. However, in a meeting called last Friday by surprise, the ECB concluded that there is no drop in deposits in the euro zone and that the exposure of European banks to the Swiss entity is “immaterial”.
The organization ended the meeting with a clear conclusion: in the euro area, in aggregate, there is no drop in deposits, that is, customers keep their money in banks, which shows the confidence of agents in the financial system European. In addition, central bank supervisors have ensured that the exposure to Credit Suisse is very low.