A central bank like the federal reserve in the united states can help banks survive a bank run by3/1/2024 ![]() ![]() Last year Credit Suisse credit default swaps surged in price. ![]() The question is, what happens next? Significance of Credit Suisse crisis Then overnight, the share price of global investment banking giant Credit Suisse crashed, causing panic in the bond market. ![]() You could sense the anxiety in global financial markets. However, it was obviously a rushed response, and sent a clear message to international financial markets that the US authorities were blindsided by the two bank failures and were scrambling to contain any whiff of a financial contagion. There was no catastrophic bank run in America earlier this week – so the response worked. Their response included providing liquidity, or cheap money, to banks and providing assurances to all bank customers that their deposits were safe, even if they were above the insurance limit. The US federal government, the Federal Reserve and regulators then scrambled to prevent widespread bank runs across the United States. New York's Signature Bank then failed over the weekend. An old-fashioned bank run leading to collapse. The ructions began on Friday last week when Silicon Valley Bank was unable to satisfy its customers' demands for deposits. The potential next phase is a global credit crunch, which could lead to another worldwide financial crisis, but regulators and central banks are pulling out all stops to prevent that from happening. We now have an international banking crisis. ![]()
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