A bad memory that reminds us. In 2008, a banking and financial crisis that originated in the United States spread globally. The bankruptcy of several American regional banks last week, including Silicon Valley Bank (SVB), caused turmoil in French financial markets. Especially since it was followed by the very bad patch experienced by Credit Suisse, one of the largest European banks, which experienced the worst session in its history on the stock market on Wednesday (-24.24% at the close ).
The Paris Stock Exchange also fell by 3.58% on Wednesday. Victims of a domino effect, European banking stocks (including Société Générale, BNP Paribas, Crédit Agricole) collapsed by more than 10%. 20 minutes takes stock of the fears of contagion on the French banking system and its defense capabilities today compared to 2008.
Could Credit Suisse go bankrupt?
“The difficulties of Credit Suisse are not surprising, because its leaders have made risky choices for several years,” explains Norbert Gaillard, economist and independent consultant. This institution is one of thirty global banks considered too big to fail. Hence the decision of the Swiss central bank to come to its rescue by making available up to 50 billion francs of cash (50.8 billion euros) to strengthen its liquidity. Markets were visibly reassured, as the bank’s stock rebounded 32% at the open. It closed the session up 19.15%. “We took the problem to the root, this decision should be enough to get Credit Suisse out of the woods. Especially since its managers are planning a complete reorganization of the company,” says Norbert Gaillard.
What links do French banks have with Credit Suisse?
“There are links due to the operations on the financial markets, which make each bank both the creditor and the debtor of the other. Hence a strong interdependence”, stresses Norbert Gaillard. This explains why we cannot leave an establishment like Credit Suisse in difficulty for very long, at the risk of a contagion of problems.
Is the state of health of French banks better than in 2008?
Their 2022 results were good. “And compared to 2008, their configuration has changed. BNP, Crédit Agricole and Société have a less risky profile, because at the time there were a lot of investments in real estate and this had weighed on them during the crisis. It weighs much less in the balance today, ”said Norbert Gaillard. Another reassuring point according to the economist: “The rather good solvency of French households, due to the fact that the banks open the floodgates of credit less than a few years ago. In addition, unemployment has dropped significantly in recent years and this should continue due to the retirement of the baby-boom generation. »
What guarantees have been in place since 2008?
International regulation has been strengthened since the 2008 crisis. The Basel agreements have reinforced banks’ capital requirements to guarantee their solvency in the face of any losses they may incur. Liquidity ratio rules have also been put in place. “In addition, the supervision of banks by the ECB is stricter than in 2008. The latter is much more on the alert than at that time, because it has more experience in crisis management. States themselves are more experienced in crisis management and how to avoid contagion. They have indeed gone through that of subprime, Greek debt, Covid, ”underlines Norbert Gaillard. Large-scale “stress tests” (bank resistance tests) have also been multiplied since 2008. These are exercises simulating extreme financial crises, making it possible to assess the resilience of banks.
Are the French sensitive to what is happening on the financial markets and do they tend to withdraw their marbles in the event of a banking turmoil?
The fear of French banks is to find themselves in difficulty, if their customers withdraw their funds in the event of general concern. But according to Norbert Gaillard, “the French have confidence in the banking system, as shown in particular by the record collection in 2022 of the Livret A, even though the international situation is complex”.
Norbert Gaillard also underlines one of the French specificities: “A good part of the cash of the big banks and at the ECB. This is reassuring in the event of the need to mobilize cash quickly. There is no risk of rapid asset sales that would not be optimal”.
What are the guaranteed amounts for each saver in each bank?
In France, it is the Deposit and Resolution Guarantee Fund (FGDR), which guarantees sight deposits up to 100,000 euros per account (current accounts, other accounts and passbook savings plans) in less than 7 working days. The FGDR also reimburses passbooks guaranteed by the State: Livret A, popular savings passbook, sustainable and solidarity development passbook) again within a maximum period of 7 working days and up to a limit of 100,000 euros per customer.
Is the rebound in European stock markets on Thursday reassuring?
European stock markets rebounded on Thursday after their fall the day before, somewhat reassured by the European Central Bank’s displayed confidence in the health of the banking sector, which has been battered for several sessions. Paris thus took 2.03%. “This crisis should eventually pass,” said Norbert Gaillard.
The ECB raised its rates by 0.5 points. Is this a good sign?
The European Central Bank did not let itself be frightened by the risk of a new banking crisis and decided on Thursday for a new rate hike of half a percentage point in order to fight inflation. The banking sector “is currently in a much stronger position than in 2008,” explained Christine Lagarde to the press. “We are closely monitoring market tensions and remain ready to react,” she continued. “It’s a good decision, because it means that we have increased the rates in line with the level of inflation, without taking into account what is happening on the markets”, comments Norbert Gaillard.
