Two major banks in Europe worry about contagion, look to regulators for reassurance - sources By Reuters
2023-03-20 00:25:15
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By Stefania Spezzati and Elisa Martinuzzi

LONDON (Reuters) - At least two major banks in Europe are examining scenarios of contagion possibly spreading in the region's banking sector and looking to the Federal Reserve and the ECB to step in with stronger signals of support, two senior executives with knowledge of the deliberations told Reuters.

The fallout from the crisis of confidence in Credit Suisse Group AG and the failure of two U.S. banks could continue to ripple through the financial system next week, the two executives separately told Reuters on Sunday.

The two banks have held their own internal deliberations on how soon the European Central Bank should weigh in to highlight banks' resilience, specifically their capital and liquidity positions, the people said.

A key focus of these internal discussions is whether such statements might backfire and stoke even more panic if they are made too soon, the people said.

The executives said that their banks and the sector are well capitalized and liquidity is strong, but they fear that the crisis of confidence will sweep up more lenders.

One of the executives said the Federal Reserve might have to move first as the failures of Silicon Valley Bank and (NASDAQ:) in the United States triggered the concerns in Europe.The ECB declined to comment. A spokesperson for the Fed didn't have an immediate comment.

The ECB on Thursday stuck with plans for a half-point rate rise to contain inflation. But it stressed it was monitoring market tensions and would respond 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 ripple throughout the entire financial system, industry executives have said.

While regulators want a resolution to Credit Suisse's crisis of confidence before markets reopen on Monday, one source cautioned the talks with UBS Group AG (SIX:) are encountering significant obstacles, and 10,000 jobs may have to be cut if the two banks combine, Reuters reported.

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