ECB convenes extraordinary meeting on ‘banking shock’ just one day after raising interest rates
The European Central Bank (ECB) convened an extraordinary meeting of its supervisory board for Friday to discuss the turmoil in the banking sector. “The council is meeting to exchange views and… To inform members about recent developments in the banking sector.“, said a spokesman quoted by German media.
Already at the beginning of the week there had been an extraordinary meeting due to the turbulences in the banking sector that arouse memories of the year 2008 when the problems started in the US led to a global financial crisis. Now in the USA the regional bank “First Republik”, has entered a difficult situation due to the fact that its customers have withdrawn a large part of their deposits which has created concern after the collapse of “Sillicon Valley Bank” and “Signature Bank”.
In Europe, the Swiss bank Credit Suisse has been in trouble and has received a capital injection from the Swiss Central Bank of 50 billion francs to overcome liquidity difficulties. Credit Suisse is one of the 50 banks that are considered “systemically relevant” to the international financial system. The fear of contagion exists and that a crisis of confidence will be generated. leading to deposit withdrawals which could drag down other banks.
On the European stock exchanges, bank stocks have been trading lower since the turbulence began. Despite the critical situation, the ECB had on Thursday maintained its course of raising interest rates and raised them by half a point. ECB President Christine Lagarde acknowledged that a few members of the board of governors had voted against the decision and would have preferred to wait for the situation in the banking sector to develop.
