Good morning. Credit Suisse attempts to regain client trust, US banks seek unprecedented amounts from the Federal Reserve, and Bill Ackman expresses concern. Here are the trending topics.
Credit Suisse’s $54 billion lifeline, secured on Thursday, allows the bank to rebuild its operations. However, some clients are not willing to wait and see the outcome. Several ultra-high-net-worth clients reduced their involvement in Asia amid this week’s chaos. In the Middle East, specific customers requested the bank to change cash deposits into treasury bills and bonds. Meanwhile, in Germany, a wealth manager was approached by Credit Suisse clients interested in transferring deposits to his company. Such a widespread decline in client base would make the restructuring process led by CEO Ulrich Koerner and his team even more challenging.
Bank Financing: In the latest week, banks collectively borrowed $164.8 billion from two Federal Reserve safety net facilities, indicating heightened funding pressures following Silicon Valley Bank’s collapse. According to the Fed’s data, banks borrowed $152.85 billion through the discount window — the conventional liquidity support for banks — during the week ending March 15, setting a new record high, up from $4.58 billion the week before. The previous record was $111 billion during the 2008 financial crisis. In a separate action, a group of US banks deposited $30 billion with First Republic Bank to demonstrate solidarity.
Ackman asks for Caution. Distributing the risk of financial contagion to create “an illusion of confidence” in First Republic Bank is “poor policy,” tweeted Bill Ackman, Pershing Square’s activist investor. He stated that the decision by the largest US banks to deposit $30 billion with First Republic “elicits more questions than answers.” This strategy, developed in collaboration with US regulators, involved contributions from JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley. Ackman added, “I have mentioned previously that every hour counts. We have let days pass. More than adequate actions are required during a confidence crisis.
ECB Shift, The European Central Bank (ECB) only adopted the “meeting-by-meeting” approach it had purportedly followed for months amidst the onset of worldwide financial turbulence. On Thursday, officials noticeably omitted those words from their statement after implementing a half-point rate increase they had indicated at their last meeting six weeks prior and even hinted at earlier. However, they clarified that such guidance on future actions had been discarded, committing to a “data-dependent” approach, with careful assessments of each decision becoming the primary focus. This change will grant the ECB increased adaptability as it contends with an increasingly complex environment.
Upcoming Events, European stocks are set to continue their upward trajectory as First Republic Bank’s rescue plan boosts investor confidence. Anticipated data releases include Italy’s trade balance and Austrian CPI inflation. The Bank of England will release an Ipsos inflation attitudes survey. Companies like Vonovia, Bechtle, and Wendel are scheduled to report earnings.
