Authors Stefania Spezzati and Elisa Martinuzzi
LONDON (Reuters) – At least two of Europe’s biggest banks are examining contagion scenarios in the region’s banking sector and are asking the Federal Reserve and ECB to step in with stronger signals of support, two senior executives familiar with the deliberations told Reuters.
The fallout from the crisis of confidence at Credit Suisse Group AG and the failure of two U.S. banks could continue to ripple through the financial system next week, two executives told Reuters on Sunday.
The two banks held their own internal deliberations on how quickly the European Central Bank should weigh in to highlight the banks’ resilience, particularly their capital and liquidity positions, the people said.
A key focus of these internal discussions is whether such statements could backfire and cause more panic if made too soon, the people said.
Executives say their banks and sector are well capitalized and liquidity is strong, but they fear a crisis of confidence will affect more creditors.
One executive said the Federal Reserve may have to move first as the failures of Silicon Valley Bank and Signature Bank in the United States have raised concerns in Europe. The ECB declined to comment. A Fed spokesman had no immediate comment.
On Thursday, the ECB stuck to plans to raise rates by half a point to curb inflation. But she emphasized that she is monitoring the tensions on the market and will react as necessary to preserve price stability and financial stability in the currency bloc.
As one of 30 global systemically important banks, Credit Suisse’s problems could spread throughout the financial system, industry executives said.
As regulators want a resolution to Credit Suisse’s crisis of confidence before markets reopen on Monday, one source warned that talks with UBS Group AG are running into significant hurdles and may have to cut 10,000 jobs if the two banks merge, Reuters reports .
(Additional reporting by Balazs Koranyi and Dan Burns. Writing by Dhara Ranasinghe; Editing by Paritosh Bansal)
