The European Central Bank has carried through with a large interest rate increase, brushing aside predictions it might dial back as U.S. bank collapses and troubles at Credit Suisse fed fears about the impact of higher rates on the global banking system.
The troubles at Credit Suisse dragged down the shares of stalwart European lenders such as Deutsche Bank, BNP Paribas and Societe General on Wednesday. Bank shares recovered Thursday.
Similar questions are being raised about what the U.S. Federal Reserve will do at its rate meeting next week. European banks also observe international rules that raised the amount of ready cash they had to keep on hand to cover deposits.But all that hasn’t kept the U.S. banking blow-up from looming large for the ECB. New evidence of concern flared Wednesday when shares in European banks fell 8.4%.
Credit Suisse, whose troubles predate the collapse of Silicon Valley Bank, then turned to the Swiss National Bank for up to $54 billion in credit to stabilize its finances,Nicolas Veron, a banking expert at the Bruegel think tank in Brussels, said European banking supervision is much stronger than in 2007 when banks were “dramatically undercapitalized and poorly supervised.” He also said that the ECB has been carefully studying the impact of higher rates on its banks.
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