World leaders rally to reassure markets, public on US banking crisis
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Loading... - Dong-hyuk Noi
- 13 Mar 2023
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A branch of the Silicon Valley Bank, in the United States. © AFP
President Joe Biden has assured US taxpayers that they will not have to pay for losses in the banking sector, after French and German authorities said that recent collapse of several US banks pose no danger to European financial institutions.
The collapse of Silicon Valley Bank (SVB) and the failure of Signature Bank have created a wave of uncertainty in global financial circles.
On Monday, US President Joe Biden said that US taxpayers will not be asked to pay for the rescue of depositors at the failed SVB bank, assuring Americans that the crisis was "under control".
While the government will guarantee that SVB depositors get their money back, "no losses will be borne by the taxpayers," Biden said. "The money will come from the fees that banks pay into deposit insurance."
Meanwhile, European equities have tipped deep into the red. Bank shares in Italy and Switzerland have fallen particularly hard. Frankfurt and Paris stock markets have dropped by about three percent, while Milan dived almost five percent at one stage and Zurich shed 1.7 percent.
France's economy minister, Bruno Le Maire, has declared that US bank failures pose no risk of contagion for European institutions. The minister's statement has been confirmed by the French central bank. But this has not calmed nerves as investors dump banking sector assets across Europe.
Fear of contagion
Banks are leading the charge southwards with investors taking aim at Spanish and Italian lenders, suggesting that these are considered the weakest links as fears rise.
"Far from calming nerves, fear of contagion has ramped up further," according to City Index analyst Fiona Cincotta.
French, German banks take a pasting on solvency fears at US lender
The crisis has sent shockwaves worldwide, with traders on red alert over further bank failures. Markets will continue to be volatile throughout the week, warned one analyst, saying traders will continue to be wary of riskier assets.
SVB is the largest retail bank to fall since the 2008 financial crisis. Read More…
