Banking Crisis in Europe and US is deepening?

Credit Suisse of Europe and First Republic Bank of the US rescued by their respective bigger players. Who is next in line?

Switzerland's second-biggest bank was forced to admit that it had “material weaknesses” in its reporting and controls procedures.

Over the last two years – the bank’s exposure to hedge fund blow-ups; a $475m scandal in Mozambique; the swift departure of its gaffe-prone chairman; a money laundering conviction; surging withdrawals; and a £6.5bn annual loss.

Top shareholder Saudi National Bank, who holds 37% of the bank, ruled out injecting any more cash into the business. But said there is no liquidity issue in the Bank.

The bank is in the process of a major restructuring plan, meant to stem major losses, which ballooned to 7.3bn Swiss francs (£6.6bn) in 2022

CEO Ulrich Koerner said that the bank's "capital, our liquidity basis is very very strong."

Credit Suisse is planning to borrow up to 54 billion Swiss francs from the Swiss National Bank. Means the problems have not yet gone away

Moody’s placed six regional banks on “downgrade” watch: First Republic, Zions Bancorp, Comerica, Intrust Financial, UMB Financial and Western Alliance.

First Republic bank is now considering various options, including a sale and boosting liquidity

Major US Banks including JPMorgan Chase, Citigroup Inc, Bank of America Corp, Wells Fargo, Goldman Sachs, Morgan Stanley were involved in the rescue process.

Is there any deeper trouble ahead for USA? Experts Say?

“There will be a search for the next victim and the recession probability is set to increase over the next weeks,” said Alberto Tocchio, a portfolio manager at Kairos Partners.

But the crisis has not blown over yet.

Subramanian, who served as India's chief economic advisor from 2018 to 2021, thinks the American government's programme may help for now but the crisis hasn't yet fully abated. "Fed program was brought to stop panic leading to bank runs. While it may help, the crisis (looming bank failures) has not blown over."

Other banks with Highest Uninsured Deposit Balances in US (Higher is riskier)

Who is Next?

Is it signalling a Full Recession in the US?

Smaller banks are likely to become more cautious about lending to consumers and businesses

That will impact GDP though it may not be a full recession in US.

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