The last week’s financial turmoil with collapsing banks, billion withdrawals and sharp swings in the stock market has had massive effects as well as consequences.
Economic concerns combined with the changed interest rate environment have, however, paved the way for surprises similar to what was seen around Silicon Valley Bank in the US, points out Henrik Braconier.
— There will be such surprises as we have seen in the past year, such as in the electricity derivatives market this summer and now in the United States. We can probably count on that, and the important thing is that the system is resilient. At the present time, we assess that the Swedish system is at a standstill.
Concerns about spread
Concerns have grown about spillover effects to the Swedish banking sector and the Financial Supervisory Authority (FI) has intensified its contacts with banks and insurance companies since the announcement about Silicon Valley Bank. After the news about Credit Suisse, they are now keeping up that work, says Braconier:
— It is chaotic on the financial market but not a financial crisis, even though we are following the development even more carefully now. As for Credit Suisse, they have been on everyone’s radar and they have had governance and profitability problems. This has meant that many financial actors have reduced their exposure to that bank to the extent that they had one.
However, FI assesses the Swedish exposure to Credit Suisse to be small as well as direct contagion effects. On the other hand, there are indirect ones in the form of price falls also for Swedish bank shares and various risk indicators have been highlighted.
— However, these are not exceptional levels, it is not comparable to the beginning of the Ukraine war or the beginning of the pandemic and not at all comparable to the financial crisis.
May be vulnerable
During the afternoon, European Central Bank (ECB) Deputy Governor Luis de Guindos highlighted to EU finance ministers that some European banks may be vulnerable to rising interest rates, exactly what happened with Silicon Valley Bank.
Although the European lenders are significantly less exposed than their American counterparts, it cannot be ruled out that some may be in a risk group based on their business models, he points out.
TT: Even in Sweden there are niche banks in addition to the big four?
— We assess that the connection to the American banks and Credit Suisse as well is very small. Then one must distinguish the fact that financial stability is not about the survival of every single actor, but that the financial system survives. Of course, we place greater emphasis on the largest players.