The European stock markets fall sharply dragged by the falls in the banking sector

A chart of the German DAX index is seen on a screen at the Frankfurt Stock Exchange, Germany. March 13, 2023. REUTERS/Staff (STAFF/)

The european bags They fell hard this Wednesday, sunk by fears in the banking sectorwhich continues to feel the effects of the recent bankruptcies in USA.

Around 10:30 a.m. GMT, Paris lost 3.23%, Milan 3.48%, Madrid 3.09% and frankfurt 2.50%.

Bank shares were especially under pressure as investors continued to worry about tensions within the sector following the collapse of Silicon Valley Bank (SVB): the index Euro Stoxx Bank fell a 5.6%while Credit Suisse fell down to a 18% to a record low after comments from its largest shareholder that it would not provide more capital. In addition, Societe Generale lost a 9.6%, Bank of Ireland lost a 9.2% and BNP Paribas fell a 8.8%

The panic in the financial markets over the last seven days has come from two medium-sized and regional banks in the United States: the BLSspecialized in financing “start ups”, with 8,500 employees worldwide and headquarters in Santa Clara (California), and the New Yorker SignatureBanksmaller and with its activity oriented to cryptocurrency companies that two years ago represented 30% of its deposits.

FILE PHOTO: The Credit Suisse logo at its headquarters in Zurich, Switzerland, March 24, 2021. REUTERS/Arnd Wiegmann/
FILE PHOTO: The Credit Suisse logo at its headquarters in Zurich, Switzerland, March 24, 2021. REUTERS/Arnd Wiegmann/ (ARND WIEGMANN/)

Financial regulators and executives around the world have tried to mitigate contagion concerns, but concerns persist about the health of smaller institutions in particular.

Rapid increases in interest rates have made it difficult for some businesses to repay or repay loans they took out from banks, increasing the chances of losses for lenders who are also worried about a recession.

However, policymakers in the European Central Bank are still leaning towards a half percentage point rate hike on Thursday, a source told Reutersas they expect inflation to remain too high in the coming years.

Investors had begun to doubt the commitment of the ECB with another big rate hike, as the collapse of BLS shocked all markets.

But the source said that it is the eurozone central bank is unlikely to abandon its plan to raise rates by 50 basis points on Thursday because doing so would damage his credibility.

FILE PHOTO: A European Central Bank sign in front and several European Union flags in front of the monetary institution's headquarters in Frankfurt, Germany, July 21, 2022. REUTERS/Wolfgang Rattay
FILE PHOTO: A sign of the European Central Bank in front and several flags of the European Union in front of the headquarters of the monetary institution in Frankfurt, Germany, July 21, 2022. REUTERS/Wolfgang Rattay (WOLFGANG RATTAY/)

In USAattention is shifting to the possibility of a stricter regulation of banksparticularly mid-tier ones like SVB and Signature Bank.

The closure of SVB on March 10, followed two days later by the collapse of Signature Bank, forced the president Joe Biden to rush to ensure that the US financial system is safe and prompted emergency measures that gave banks access to more funds.

In an attempt to avoid a similar crisis in the future, the US Federal Reserve is also considering stricter rules and supervision for midsize banks similar in size to the SVB.

Moody’s Investors Service on Tuesday revised its outlook on the US banking system to “negative” from “stable”citing increased risks for the sector.

In Wall Street, futures for the benchmark S&P 500 index were up less than 0.1%. the one with the index Dow Jones gained 0.2%.

In Asiathe bank index of the Stock Exchange of Tokyo lost more than 4%after three straight days of strong sales.

Investors were particularly concerned about the huge bond holdings, particularly US Treasuries, held by Japanese lenders, but the Japanese finance minister, shunichi suzukisaid on Wednesday that differences in the structure of bank deposits meant that local banks would not face similar incidents to SVB.

(With information from Reuters, AFP, EFE)

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