ReportWire

Tag: Recessions and depressions

  • Asian shares mixed after weekend lull in bank worries

    Asian shares mixed after weekend lull in bank worries

    [ad_1]

    BANGKOK — Asian shares were mixed on Monday after stocks on Wall Street shook off a weak start to end higher on Wall Street last week despite persisting worries over banks on both sides of the Atlantic.

    Coming off a lull in fresh news of troubles over the weekend, benchmarks slipped in Hong Kong, Shanghai, Seoul and Taiwan but rose in Tokyo and Sydney. U.S. futures gained and oil prices were little changed.

    Concerns that higher interest rates are squeezing lenders have revived fears of recession and raised uncertainty about policies of the Federal Reserve and other central banks. On Friday, news about Deutsche Bank’s credit default swaps was the latest big news to shake the markets.

    “This is keeping financial stocks pressured with traders on the lookout for any other potential pockets of trouble in the global financial system,” Tim Waterer, an analyst at Kohle Capital Markets, said in a commentary. Given recent market gains, “it’s fair to say that traders are putting on a brave face despite no assurances that we have seen the last of the banking sector woes,” he said.

    The managing director of the International Monetary Fund, Kristalina Georgieva, told a conference in Beijing on Sunday that risks to financial stability have risen as interest rates are raised to fight inflation. She said actions by central banks and other regulators have helped to ease strains on markets, “but uncertainty is high, which underscores the need for vigilance.”

    Chinese markets declined Monday after the government reported that industrial profits fell nearly 23% in the first two months of the year from a year earlier.

    Hong Kong’s Hang Seng gave up 0.5% to 19,815.03 and the Shanghai Composite index lost 1.1% to 3,231.28.

    Tokyo’s Nikkei 225 added 0.4% to 27,501.60 and the Kospi in Seoul shed 0.3% to 2,408.58. Australia’s S&P/ASX 200 edged 0.2% higher, to 6,969.20 and the Sensex in Mumbai gained 0.4%. Shares edged higher in Bangkok.

    On Friday, the S&P 500 rose 0.6%, marking its second straight weekly gain, to close at 3,970.99. The Dow Jones Industrial Average added 0.4% to 32,237.53 and the Nasdaq composite climbed 0.3% to 11,823.96. The Russell 2000 index rose 0.9% to 1,734.92.

    Investors are focused on what the Federal Reserve and other central banks will do with interest rates going forward after the recent spate of turmoil in the banking sector.

    Deutsche Bank ‘s stock tumbled 8.5% in Germany on Friday and shares of other major European banks suffered smaller declines. Earlier this month, shares of and faith in Swiss bank Credit Suisse, which has its own unique set of troubles, fell so much that regulators brokered a takeover of it by rival UBS.

    The second- and third-largest U.S. bank failures in history earlier this month, of Silicon Valley Bank and Signature Bank, have cast a harsher spotlight across the entire banking industry. Investors have zeroed in on smaller and midsized banks, the ones below in size of the “too-big-to-fail” banks and seen as greater risks.

    Pressure on lenders could hinder lending to small and midsized businesses across the country. That in turn could lead to less hiring, a weaker economy and a higher potential for a recession that many economists already saw as likely.

    Friday’s reports on the economy came in mixed, with orders for long-lasting manufactured goods slower last month than economists expected while business activity showed the fastest uptick in almost a year, according to a preliminary report from S&P Global.

    In other trading, U.S. benchmark crude oil picked up 2 cents to $69.28 per barrel in electronic trading on the New York Mercantile Exchange. It lost 70 cents to $69.26 on Friday.

    Brent crude, the pricing basis for international trading, lost 3 cents to $74.55 in London.

    The U.S. dollar rose to 130.64 Japanese yen from 130.57 yen. The euro weakened to $1.0771 from $1.0774.

    [ad_2]

    Source link

  • Asian shares mixed after weekend lull in bank worries

    Asian shares mixed after weekend lull in bank worries

    [ad_1]

    BANGKOK — Asian shares were mixed on Monday after stocks on Wall Street shook off a weak start to end higher on Wall Street last week despite persisting worries over banks on both sides of the Atlantic.

    Coming off a lull in fresh news of troubles over the weekend, benchmarks slipped in Hong Kong, Shanghai, Seoul and Taiwan but rose in Tokyo and Sydney. U.S. futures gained and oil prices were little changed.

    Concerns that higher interest rates are squeezing lenders have revived fears of recession and raised uncertainty about policies of the Federal Reserve and other central banks. On Friday, news about Deutsche Bank’s credit default swaps was the latest big news to shake the markets.

    “This is keeping financial stocks pressured with traders on the lookout for any other potential pockets of trouble in the global financial system,” Tim Waterer, an analyst at Kohle Capital Markets, said in a commentary. Given recent market gains, “it’s fair to say that traders are putting on a brave face despite no assurances that we have seen the last of the banking sector woes,” he said.

    The managing director of the International Monetary Fund, Kristalina Georgieva, told a conference in Beijing on Sunday that risks to financial stability have risen as interest rates are raised to fight inflation. She said actions by central banks and other regulators have helped to ease strains on markets, “but uncertainty is high, which underscores the need for vigilance.”

    Chinese markets declined Monday after the government reported that industrial profits fell nearly 23% in the first two months of the year from a year earlier.

    Hong Kong’s Hang Seng gave up 0.5% to 19,815.03 and the Shanghai Composite index lost 1.1% to 3,231.28.

    Tokyo’s Nikkei 225 added 0.4% to 27,501.60 and the Kospi in Seoul shed 0.3% to 2,408.58. Australia’s S&P/ASX 200 edged 0.2% higher, to 6,969.20 and the Sensex in Mumbai gained 0.4%. Shares edged higher in Bangkok.

    On Friday, the S&P 500 rose 0.6%, marking its second straight weekly gain, to close at 3,970.99. The Dow Jones Industrial Average added 0.4% to 32,237.53 and the Nasdaq composite climbed 0.3% to 11,823.96. The Russell 2000 index rose 0.9% to 1,734.92.

    Investors are focused on what the Federal Reserve and other central banks will do with interest rates going forward after the recent spate of turmoil in the banking sector.

    Deutsche Bank ‘s stock tumbled 8.5% in Germany on Friday and shares of other major European banks suffered smaller declines. Earlier this month, shares of and faith in Swiss bank Credit Suisse, which has its own unique set of troubles, fell so much that regulators brokered a takeover of it by rival UBS.

    The second- and third-largest U.S. bank failures in history earlier this month, of Silicon Valley Bank and Signature Bank, have cast a harsher spotlight across the entire banking industry. Investors have zeroed in on smaller and midsized banks, the ones below in size of the “too-big-to-fail” banks and seen as greater risks.

    Pressure on lenders could hinder lending to small and midsized businesses across the country. That in turn could lead to less hiring, a weaker economy and a higher potential for a recession that many economists already saw as likely.

    Friday’s reports on the economy came in mixed, with orders for long-lasting manufactured goods slower last month than economists expected while business activity showed the fastest uptick in almost a year, according to a preliminary report from S&P Global.

    In other trading, U.S. benchmark crude oil picked up 2 cents to $69.28 per barrel in electronic trading on the New York Mercantile Exchange. It lost 70 cents to $69.26 on Friday.

    Brent crude, the pricing basis for international trading, lost 3 cents to $74.55 in London.

    The U.S. dollar rose to 130.64 Japanese yen from 130.57 yen. The euro weakened to $1.0771 from $1.0774.

    [ad_2]

    Source link

  • Bank failures and rescue test Yellen’s decades of experience

    Bank failures and rescue test Yellen’s decades of experience

    [ad_1]

    WASHINGTON — Working against the clock to stop a developing banking crisis, Treasury Secretary Janet Yellen had until sunset on Sunday, March 12, to come up with a plan to calm the U.S. economy.

    She quickly turned to someone who had been through the fire before, and on a much larger scale: Hank Paulson.

    Paulson, who ran the Treasury Department during the financial crisis in 2008, counseled immediate government action. “It’s really hard to stop or even slow down a bank run. And to do that requires a powerful and quick government response,” Paulson said, recounting what he told Yellen.

    A bank run on Silicon Valley Bank had begun earlier in the week. Regulators took it over by that Friday afternoon. The move panicked shareholders and depositors, stirring stark reminders of earlier failures that triggered the Great Recession.

    Perhaps no treasury secretary has come to the office with Yellen’s ample resume, including service as the chair of the Federal Reserve and a lifetime of studying economics and finance. That experience was put to a severe test as she worked to assure multiple constituencies, including financial markets, balky Republicans in Congress and President Joe Biden’s White House economic team.

    Yellen spent that crucial period two weeks ago assembling Federal Reserve officials; regulators at the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency; lawmakers, including congressional leaders on banking — Sen. Sherrod Brown, D-Ohio, and Rep. Patrick McHenry, R-N.C.; and Wall Street executives such as Jamie Dimon, the chief executive of J.P. Morgan & Chase.

    But few could relate as well as Paulson, who had asked Congress for authority to buy up $700 billion in distressed mortgage-related assets from private firms to save the larger U.S. financial system.

    His words to Yellen as she navigated the bank collapses: “We are fighting for the survival of our regional banks.”

    The Fed defines regional banks as those with total assets between $10 billion to $100 billion, not as small as community banks and not as large as national ones. Regional and community banking organizations constitute the largest number of banking institutions supervised by the Federal Reserve.

    The crisis became apparent on Wednesday, March 8. Silicon Valley Bank’s chief executive officer, Greg Becker had sent a letter to shareholders stating that the bank would need to raise $2.25 billion to shore up its finances after suffering significant losses.

    The bank held an unusually high level of uninsured deposits, and many investments in long-term government bonds and mortgage-backed securities had tumbled in value as interest rates rose. That caused depositors on Thursday, March 9, to rush to withdraw their funds en masse. It triggered a bank run.

    On the next afternoon, Yellen spoke with Fed Chair Jerome Powell, FDIC head Martin Gruenberg, acting head of the OCC Michael Hsu and San Francisco Fed chair Mary Daly. Regulators rushed to place Silicon Valley Bank into FDIC receivership.

    That weekend, staff from Treasury, the Fed, and FDIC began the search for a potential buyer for the bank. Yellen and other federal officials met to ensure the bank could make payroll by the coming Monday, and that no taxpayer money would be used to fund the rescue. And do it all before Asian markets opened for the week.

    Yellen also had to assuage Republicans in Congress. She talked with McHenry and other lawmakers who wanted to know whether the actions would lead to more regulation. McHenry did not respond to a request for comment from The Associated Press, but said at an American Bankers Association event this past week that he supported the government’s decision to make depositors whole.

    By Sunday evening, March 12, the Treasury, the Federal Reserve, and FDIC sent a joint statement announcing that New York-based Signature Bank had also failed and was being seized. Officials also said that an emergency lending package would ensure that all depositors at Silicon Valley Bank and New York-based Signature Bank would be protected.

    In a matter of days, a third bank, First Republic was fortified by $30 billion from 11 big banks to prevent more regional institutions from collapsing.

    Yellen came up with the idea of using bank funds to save First Republic and first raised it with Powell, Gruenberg and other regulators. Then she had a call with Dimon and broached the idea. After that call, Dimon reportedly said “we have our marching orders” and proceeded to build a coalition of banks, according to two people briefed on the matter, speaking anonymously because they were not authorized to discuss details of a private conversation.

    A representative from Dimon’s office did not respond to a request for comment.

    This account of Yellen’s actions during that weekend is based on more than a dozen interviews.

    A former Federal Reserve governor, Sarah Bloom Raskin, said Yellen and other policymakers will now have to determine “how two banks that many didn’t think would pose a systemic risk to the banking system” could so threaten the nation’s financial health.

    A year ago, she withdrew her name as a Fed governor nominee after not receiving enough Senate support. She had previously served from 2010 to 2016 and took her oath of office at the same time as Yellen, a vice chair at the time.

    Brown, who urged President Barack Obama to nominate Yellen to succeed Ben Bernanke as Fed chair, said people “realize how competent she is and in how she’s charged with doing big things in the administration.”

    Now, Yellen has to respond to accusations that the Biden administration is bailing out risky banks. Some Republicans have put the blame on Biden administration spending, which they say triggered 40-year high inflation, forcing the the Fed to raise interest rates to tame prices, in turn impacting banks and their investments.

    Sen. Tim Scott, R-S.C., said at an American Bankers Association event last week that “when you go to a 40-year high level of inflation, the truth of the matter when inflation is that high, you should immediately go into action, the Fed doesn’t have a scalpel, it has a hammer and it hurts.”

    Biden has since called on Congress to strengthen the rules for banks to prevent future failures and to allow regulators to impose tougher penalties on the executives of failed banks, including clawing back compensation and making it easier to bar them from working in the industry.

    Paulson said “we’re really fortunate to have a smart, experienced treasury secretary,” describing Yellen as “one who reaches out to gets a range of opinions and talks to market participants on a real time basis.”

    But her test is not over.

    She called a meeting of the Financial Stability Oversight Council on Friday, to discuss, in part, the developments at Deutsche Bank, the German multinational investment bank whose stock was tumbling.

    [ad_2]

    Source link

  • EU leaders grapple with bank risks as economy weakens

    EU leaders grapple with bank risks as economy weakens

    [ad_1]

    BRUSSELS — European Union leaders gathered Friday to gauge the risk of a banking crisis developing from recent global financial turbulence and hitting the economy even harder than the energy crunch tied to Russia’s war in Ukraine.

    The deliberations by EU government heads in Brussels follow U.S. regulators shutting down two U.S. banks, including Silicon Valley Bank, and a Swiss-orchestrated takeover of troubled lender Credit Suisse by rival UBS.

    The emergency actions on both sides of the Atlantic revived memories of the 2008 global financial meltdown and the ensuing EU sovereign debt crisis, which almost broke apart the euro currency now shared by 20 European countries.

    “For the moment, we see no reason to be worried,” Belgian Prime Minister Alexander De Croo told reporters on his way to the EU meeting. “But we monitor it really closely, almost on a daily basis, because no one knows what can happen.”

    The European economy has been slowing rapidly since Russia invaded Ukraine 13 months ago to the day, leaving the EU flirting with recession. The war has fueled inflation by prompting cuts in supplies of previously abundant Russian oil, natural gas and coal and by denting consumer and business confidence.

    The European Commission, the EU’s executive arm, expects economic growth in the 27-nation bloc to slow to 0.8% this year from 3.5% in 2022 and 5.4% in 2021. A projected rebound in growth to 1.6% next year depends on a sound banking sector able to lend to businesses and consumers and protect deposits.

    The EU has beefed up its regulation of financial institutions since the euro debt crisis, and little sign has emerged so far of broader contagion in Europe from Credit Suisse’s dramatic rescue.

    Nonetheless, financial supervision in Europe remains a patchwork of EU and national authorities pursuing common approaches rather than heeding an actual single European rulebook.

    For example, the euro area still lacks a common deposit insurance system, which is widely considered a key defense against future European bank crises. A stalemate among national capitals over how to share risk has left the bloc without this regulatory pillar.

    On the market front, officials have said European banks generally have adequate cash buffers — while still urging vigilance.

    “I am very confident in the amount of liquidity, the amount of resilience, that our banking system has built up,” said Paschal Donohoe, who leads the group of eurozone finance chiefs and is Ireland’s public expenditure minister. “But we can never be complacent.”

    One reason for prudence is that the European Central Bank has raised interest rates from record lows, denting the balance sheets of lenders and making it more expensive for consumers and businesses to get loans. The ECB is seeking to bring stubbornly high euro-area inflation, which was 8.5% in February, closer to a 2% target.

    ECB President Christine Lagarde and Donohoe are attending the EU summit to share their views about the economy.

    “I’m really looking forward to the discussions with the president of the European Central Bank to understand where we are going and what tools they plan to use in the future — what are the prospects for our economy and inflation,” Estonian Prime Minister Kaja Kallas said.

    [ad_2]

    Source link

  • Asian shares fall on banking turmoil, recession worries

    Asian shares fall on banking turmoil, recession worries

    [ad_1]

    BANGKOK — Shares fell Friday in Asia as worries over turmoil in the banking sector and recession risks overshadowed gains on Wall Street.

    Benchmarks declined in most major markets, while U.S. futures were higher. Oil prices fell.

    Investors are worried that more banks might suffer a debilitating exodus of customers following the second- and third-largest U.S. bank failures in history. That turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after hiking them to market-rattling heights over the last year.

    The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.

    Regional banks shares in Asia were modestly lower Friday, with HSBC Holdings plc losing 2.7% in Hong Kong while mid-sized Japanese bank Resona Holdings declined 3%.

    Shares in Japanese energy and electronics company Toshiba Corp. gained 4.3% after it announced late Thursday that it had accepted a $15 billion tender offer from a buyout fund made up of the nation’s major banks and companies. If regulators approve it, the proposed buyout by private equity firm Japan Industrial Partners would be a major step in troubled Toshiba’s yearslong turnaround effort, allowing it to go private.

    Tokyo’s Nikkei 225 index lost 0.1% to 27,385.25 and the Kospi in Seoul gave up 0.4% to 2,414.96. Hong Kong’s Hang Seng slipped 0.8% to 19,885.45 and the Shanghai Composite index edged 0.1% lower, to 3,265.55.

    Australia’s S&P/ASX 200 shed 0.2% to 6,955.20. Shares rose in Bangkok, Mumbai and Taiwan.

    On Thursday, the S&P 500 added 0.3% for its third gain in four days, closing at 3,948.72. The Dow Jones Industrial Average gained 0.2% to 32,105.25 after seeing an early gain of 481 points evaporate. The Nasdaq composite held up better thanks to strength in technology shares, gaining 1% to 11,787.40.

    Big technology and other high-growth stocks were among the strongest on Wall Street. Nvidia rose 2.7%, and Microsoft gained 2%.

    Stocks fell sharply the day before after the Federal Reserve indicated that while the end may be near for its hikes to interest rates, it still doesn’t expect to cut rates this year. Fed Chair Jerome Powell also insisted the Fed could keep raising rates if inflation stays high.

    Markets were also still mulling comments from Treasury Secretary Janet Yellen, who said the government is not considering blanket protections for all customers at all banks. She did say the government will make all depositors whole at banks, on a case-by-case basis, if failing to do so would pose a risk for the broader system.

    Implicit in that is perhaps the hint that any bank failure could be seen as such a systemic risk. Failures at both Silicon Valley Bank and Signature Bank met that criteria. Depositors were promised all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.

    Stocks in the financial industry ended up being the heaviest weight on the S&P 500 despite rising in the morning. First Republic Bank fell 6% after giving up a gain of nearly 10%.

    The Fed’s Powell said such fears were part of the reason the central bank raised rates by only a quarter of a percentage point Wednesday instead of more. A pullback in lending could act almost like a rate hike on its own, he said.

    In markets abroad, stocks in London fell 0.9% after the Bank of England also raised its key rate by a quarter of a percentage point. Stocks were mixed elsewhere across Europe and Asia.

    On Wall Street, shares of Coinbase Global fell 14.1% after the cryptocurrency trading platform said it had been warned by the Securities and Exchange Commission that it could face charges of violating U.S. securities laws.

    In other trading Friday, U.S. benchmark crude oil slipped 1 cent to $69.95 per barrel in electronic trading on the New York Mercantile Exchange. It gave up 94 cents to $69.96 per barrel.

    Brent crude, the pricing basis for international oil, lost 5 cents to $75.45 per barrel.

    The U.S. dollar fell to 130.33 yen from 130.83 yen. The euro slipped to $1.0831 from $1.0833.

    [ad_2]

    Source link

  • Asian shares fall on banking turmoil, recession worries

    Asian shares fall on banking turmoil, recession worries

    [ad_1]

    BANGKOK — Shares fell Friday in Asia as worries over turmoil in the banking sector and recession risks overshadowed gains on Wall Street.

    Benchmarks declined in most major markets, while U.S. futures were higher. Oil prices fell.

    Investors are worried that more banks might suffer a debilitating exodus of customers following the second- and third-largest U.S. bank failures in history. That turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after hiking them to market-rattling heights over the last year.

    The fear is that all the turmoil in the banking industry could cause a sharp pullback in lending to small and midsized businesses around the country. That could put more pressure on the economy, raising the risk for a recession that many economists already saw as likely.

    Regional banks shares in Asia were modestly lower Friday, with HSBC Holdings plc losing 2.7% in Hong Kong while mid-sized Japanese bank Resona Holdings declined 3%.

    Shares in Japanese energy and electronics company Toshiba Corp. gained 4.3% after it announced late Thursday that it had accepted a $15 billion tender offer from a buyout fund made up of the nation’s major banks and companies. If regulators approve it, the proposed buyout by private equity firm Japan Industrial Partners would be a major step in troubled Toshiba’s yearslong turnaround effort, allowing it to go private.

    Tokyo’s Nikkei 225 index lost 0.1% to 27,385.25 and the Kospi in Seoul gave up 0.4% to 2,414.96. Hong Kong’s Hang Seng slipped 0.8% to 19,885.45 and the Shanghai Composite index edged 0.1% lower, to 3,265.55.

    Australia’s S&P/ASX 200 shed 0.2% to 6,955.20. Shares rose in Bangkok, Mumbai and Taiwan.

    On Thursday, the S&P 500 added 0.3% for its third gain in four days, closing at 3,948.72. The Dow Jones Industrial Average gained 0.2% to 32,105.25 after seeing an early gain of 481 points evaporate. The Nasdaq composite held up better thanks to strength in technology shares, gaining 1% to 11,787.40.

    Big technology and other high-growth stocks were among the strongest on Wall Street. Nvidia rose 2.7%, and Microsoft gained 2%.

    Stocks fell sharply the day before after the Federal Reserve indicated that while the end may be near for its hikes to interest rates, it still doesn’t expect to cut rates this year. Fed Chair Jerome Powell also insisted the Fed could keep raising rates if inflation stays high.

    Markets were also still mulling comments from Treasury Secretary Janet Yellen, who said the government is not considering blanket protections for all customers at all banks. She did say the government will make all depositors whole at banks, on a case-by-case basis, if failing to do so would pose a risk for the broader system.

    Implicit in that is perhaps the hint that any bank failure could be seen as such a systemic risk. Failures at both Silicon Valley Bank and Signature Bank met that criteria. Depositors were promised all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.

    Stocks in the financial industry ended up being the heaviest weight on the S&P 500 despite rising in the morning. First Republic Bank fell 6% after giving up a gain of nearly 10%.

    The Fed’s Powell said such fears were part of the reason the central bank raised rates by only a quarter of a percentage point Wednesday instead of more. A pullback in lending could act almost like a rate hike on its own, he said.

    In markets abroad, stocks in London fell 0.9% after the Bank of England also raised its key rate by a quarter of a percentage point. Stocks were mixed elsewhere across Europe and Asia.

    On Wall Street, shares of Coinbase Global fell 14.1% after the cryptocurrency trading platform said it had been warned by the Securities and Exchange Commission that it could face charges of violating U.S. securities laws.

    In other trading Friday, U.S. benchmark crude oil slipped 1 cent to $69.95 per barrel in electronic trading on the New York Mercantile Exchange. It gave up 94 cents to $69.96 per barrel.

    Brent crude, the pricing basis for international oil, lost 5 cents to $75.45 per barrel.

    The U.S. dollar fell to 130.33 yen from 130.83 yen. The euro slipped to $1.0831 from $1.0833.

    [ad_2]

    Source link

  • Americans’ faith in banks low after failures: AP-NORC poll

    Americans’ faith in banks low after failures: AP-NORC poll

    [ad_1]

    WASHINGTON — Only 10% of U.S. adults say they have high confidence in the nation’s banks and other financial institutions, a new poll finds. That’s down from the 22% who said they had high confidence in 2020.

    Following the collapse of Silicon Valley Bank this month, the poll from The Associated Press-NORC Center for Public Affairs Research also finds that a majority say the government is not doing enough to regulate the industry.

    The underwhelming assessment of America’s banks and bank regulation comes after a series of shocks brought back disturbing memories of the 2008-2009 financial crisis.

    Silicon Valley Bank, the nation’s 16th-biggest, failed March 10 after making risky bets in the bond market. Two days later, regulators closed New York-based Signature Bank, which had gotten involved in cryptocurrencies. Across the Atlantic Ocean, long-troubled Credit Suisse was acquired by rival UBS on Sunday in a shotgun marriage designed to restore confidence in global financial institutions.

    In the United States, the tumult has raised questions among policymakers about 2018 legislation that rolled back strict regulations put in place after the financial crisis.

    The poll suggests the U.S. public shares that concern: 56% say the government isn’t doing enough to regulate banks and other financial institutions, while 27% say it’s doing the right amount and 15% say it’s regulating too much. The worry about under-regulation is bipartisan: 63% of Democrats say current bank regulation is insufficient, as do 51% of Republicans.

    U.S. Marine Corps veteran Philip Metscher, 53, a stay-at-home father of seven in Sacramento, California, said he has little faith in bankers or the government agencies that are supposed to regulate them.

    “It’s like they have free rein to do whatever they want with money,’’ said Metscher, a Republican.

    The poll finds that in addition to the 10% of Americans saying that they have high confidence in the nation’s banking institutions, 57% do have some confidence; 31% have hardly any.

    Though confidence in banks and financial institutions has decreased even since the last time that question was asked on an AP-NORC poll in 2020, low confidence among Americans in their public institutions is nothing new — the General Social Survey, which has tracked trends in public opinion for decades, shows that confidence in institutions ranging from the financial industry to organized religion and from the news media to Congress has declined substantially since the 1970s. The new poll shows few Americans have high confidence in any branch of the U.S. government.

    There’s been little change in the already glum assessment of the U.S. economy since a month ago, before the recent banking system turmoil, the poll shows. Only a quarter say national economic conditions are good; three quarters call them poor.

    But 43% of Democrats call the economy good, versus just 7% of Republicans.

    About half of U.S. adults describe their personal financial situations as good, a drop from last year when about 6 in 10 said that. About 6 in 10 Democrats and about half of Republicans give positive assessments of their current finances.

    With a Democrat in the White House, Republicans are more likely than Democrats (36% versus 15%) to say their finances will get worse over the next year; 38% of Democrats say they expect their finances to improve, versus 22% of Republicans.

    Overall, about half of U.S. adults expect U.S. economic conditions to deteriorate over the next year. Again, there’s a political divide: About three-quarters of Republicans but only a third of Democrats expect the national economy to worsen.

    American households have been hit hard by inflation, which began to pick up in the spring of 2021. Adjusted for inflation, U.S. hourly wages have fallen for 23 straight months compared to a year earlier.

    “You never know what’s going on. It’s paycheck to paycheck,’’ said Metscher in Sacramento. “I’m looking at food prices, gas prices. It reminds me of being a kid growing up’’ during the high-inflation 1970s.

    Tyronda Springer, 28, a mother of two in Banks, Alabama, who works in a warehouse loading trucks, is struggling with the cost of living.

    “I get paid every two weeks,’’ she said. “One of my checks goes straight to daycare. The rest is what I have to use to pay the bills. It’s just ridiculous.’’ But Springer, a Democrat, blames businesses, not President Joe Biden or the government, for ratcheting prices higher. “The government can only do so much,’’ she said.

    In response to surging consumer prices, the Federal Reserve has raised its benchmark interest rate nine times over the past year, including by a quarter-point on Wednesday. But the rate hikes are putting a strain on banks. In fact, Silicon Valley Bank ran into trouble as higher rates pushed down the value of its investments in bonds.

    “It’s a financial house of cards,’’ said Bryan Martin, 49, of Westfield, New York, who works at a sewage treatment plant.

    “The Fed is stuck,’’ said Martin, who does not identify with either political party but leans Republican. The central bank has to raise interest rates to fight inflation, but higher rates are hurting the financial system. “These banks,’’ he said, “are starting to fail.’’

    Darlene Brady, 72, a retired nurse’s aide in Butler, Pennsylvania, has limited confidence in banks. Still, Brady, a Democrat, is not worried about her own bank savings, thanks to federal deposit insurance that covers up to $250,000.

    “I’m way below that,’’ she said. ___

    The poll of 1,081 adults was conducted Mar. 16-20 using a sample drawn from NORC’s probability-based AmeriSpeak Panel, which is designed to be representative of the U.S. population. The margin of sampling error for all respondents is plus or minus 4.0 percentage points.

    [ad_2]

    Source link

  • Asian shares advance on back of Wall Street rally

    Asian shares advance on back of Wall Street rally

    [ad_1]

    BANGKOK — Asian shares advanced Wednesday after a Wall Street rally led by the banks most beaten down by the industry’s crisis.

    Oil prices fell back and U.S. futures were little changed.

    Investors are awaiting an interest rate decision by the Federal Reserve, which is expected to temper its efforts to tame inflation given the recent turmoil that has wracked the banking sector. Some of Wall Street’s fear washed out after U.S. Treasury Secretary Janet Yellen said the government could offer the banking industry more assistance if needed.

    Most economists expect the Fed to announce a relatively modest quarter-point hike in its benchmark rate, its ninth hike since March of last year.

    Markets around the world have pinballed sharply this month on worries the banking system may be cracking under the pressure of the fastest set of hikes to interest rates in decades. This week’s rally now runs into a huge test with the Fed decision.

    In Asian trading, Tokyo’s Nikkei 225 surged 1.9% to 27,466.61, catching up on gains after the market was closed on Tuesday for a holiday. Hong Kong’s Hang Seng index advanced 1.9% to 19,631.80 and the Shanghai Composite index added 0.2% to 3,261.14.

    Australia’s S&P/ASX 200 jumped 0.9% to 7,015.60. The Kospi in South Korea climbed 1.2% to 2,417.14.

    Tuesday on Wall Street, the S&P 500 rose 1.3% to lock in its first back-to-back gain since Silicon Valley Bank’s rapid failure began two weeks ago. It closed at 4,002.87.

    The Dow Jones Industrial Average rose 1% to 32,560.60, while the Nasdaq composite jumped 1.6% to 11,860.11.

    Yellen told a bankers’ group more government assistance “could be warranted” if risks arise that could bring down the system. That could mean making sure customers at a weakened bank get all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.

    “Janet Yellen coming out and saying should other deposits need to be protected, they’re willing and able to do that, I think that’s a very strong statement,” said Mary Ann Bartels, chief investment strategist at Sanctuary Wealth. “And so markets have been able to calm down.”

    Earlier this month, the U.S. government said it would make all depositors at Silicon Valley Bank and Signature Bank whole. They were the second- and third-largest U.S. bank failures in history.

    Those banks had struggled as depositors rushed to pull their money out en masse. Such runs can topple a bank, and investors have since been hunting for the next one that could fall. Much focus has been on First Republic Bank, which in some ways is similar to Silicon Valley Bank. Its stock had lost 90% for the month through Monday but jumped 29.5% Tuesday.

    Other smaller and mid-sized banks also rallied, including a 9.1% climb for Comerica and a 9.3% jump for KeyCorp.

    Hopes for the banking industry began to turn over the weekend after regulators pushed together two huge Swiss banks. Shares of both banks rose Tuesday in Switzerland, including a 12.1% jump for acquirer UBS. Credit Suisse, meanwhile, rose 7.3% after tumbling a day earlier.

    Central banks have jacked up rates at a blistering pace in hopes of getting high inflation under control. Higher rates slow the economy, raising risks of a recession and also hurting prices for stocks and other investments.

    Earlier this month, much of Wall Street was bracing for the Fed to reaccelerate its hikes and raise by 0.50 percentage points on Wednesday after reports on the job market, retail sales and inflation came in hotter than expected. Now, traders are beginning to bet that the Fed might even cut interest rates later this year.

    In other trading Wednesday, U.S. benchmark crude oil lost 64 cents to $69.03 per barrel in electronic trading on the New York Mercantile Exchange. It jumped $1.85 to $69.67 on Tuesday.

    Brent crude, the pricing basis for international oils, declined 73 cents to $74.59 per barrel.

    The dollar fell to 132.40 Japanese yen from 132.47 yen. The euro edged up to $1.0772 from $1.0770.

    ___

    [ad_2]

    Source link

  • IMF to assess Sri Lankan governance as part of $3B bailout

    IMF to assess Sri Lankan governance as part of $3B bailout

    [ad_1]

    COLOMBO, Sri Lanka — The International Monetary Fund said Tuesday it is assessing Sri Lanka’s governance in the first case of an Asian country facing scrutiny for corruption as part of a bailout program.

    The IMF executive board approved a nearly $3 billion bailout plan for the bankrupt nation Monday and about $333 million was to be disbursed immediately to help alleviate the country’s humanitarian crisis. The approval also will open up financial support from other institutions.

    Sri Lanka suspended repayment of its debt last year as it ran short of foreign currency needed to pay for imports of fuel and other essentials. Shortages led to street protests that forced out Sri Lanka’s president. The economic situation has improved under current President Ranil Wickremesinghe, but his plans to privatize state companies have raised objections.

    The senior mission chief for the IMF in Sri Lanka said the development lender was “conducting an in-depth governance diagnostic exercise which will assess corruption and governance vulnerabilities in Sri Lanka and provide prioritized and sequenced recommendations.”

    “Sri Lanka will be the first country in Asia to undergo a governance diagnostic exercise by the IMF. We look forward to further engagement and collaboration with stakeholders and civil society organizations on this critical reform area,” Peter Breuer told reporters.

    Sri Lankans took to the streets since last year demanding accountability for alleged corruption and demanding recovery of assets allegedly stolen by members of a former ruling family. Graft has been a main factor behind the country’s economic meltdown, critics of the government say.

    “Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities,” IMF Managing Director Kristalina Georgieva said in a statement Monday.

    “Institutions and governance frameworks require deep reforms,” she said.

    With the IMF approval, Sri Lanka will no longer be considered a bankrupt nation and the country can resume its normal transactions, Wickremesinghe said in a brief recorded statement on Tuesday.

    “As our foreign currency improves, we will gradually lift import restrictions. In the first cycle we will bring in essential goods, medicines and goods needed for the tourism industry,” Wickremesinghe said adding that he expects to table the agreement with the IMF in Parliament after making a detailed statement on Wednesday.

    The IMF’s approval will unlock financing of up to $7 billion from it and other international financial institutions, Wickremesinghe’s office said earlier.

    Earlier this month, the last hurdle for the approval was cleared when China joined Sri Lanka’s other creditors in providing assurances for debt restructuring.

    Sri Lanka increased income taxes sharply and removed electricity and fuel subsidies, fulfilling prerequisites of the IMF program. The moves have further burdened the public. Authorities must now discuss with Sri Lanka’s creditors how to restructure its debt.

    “The economic impact of the reforms on the poor and vulnerable needs to be mitigated with appropriate measures,” Breuer said.

    “Tax reforms under the program are designed to be progressive, that is, ensuring greater contributions from high-income earners. Efforts to increase tax revenues should be pursued in a growth-friendly manner while protecting the poor and most vulnerable,” he said.

    Sri Lanka’s foreign reserves ran short as tourism and export revenues dried up during the COVID-19 pandemic and it faced heavy debt payments for megaprojects funded by Chinese and other international lenders that did not generate enough income. It also used its currency reserves to try to stabilize the Sri Lankan rupee.

    Since Wickremesinghe took over from ousted ex-President Gotobaya Rajapaksa he has managed to reduce shortages and end hours-long daily power cuts. The central bank says its reserves have improved and the black market no longer controls the foreign currency trade.

    However, trade unions oppose Wickremesinghe plans to privatize state companies as part of his reform agenda, Public resentment may flare if he fails to take action against the Rajapaksa family, who people believe were responsible for the economic crisis.

    Wickremesinghe’s critics accuse him of shielding the Rajapaksas, who still control a majority of lawmakers in Parliament, in return for their support for his presidency.

    ___

    Find more AP Asia-Pacific coverage at https://apnews.com/hub/asia-pacific

    [ad_2]

    Source link

  • IMF approves crucial $3B bailout for bankrupt Sri Lanka

    IMF approves crucial $3B bailout for bankrupt Sri Lanka

    [ad_1]

    COLOMBO, Sri Lanka — The International Monetary Fund said Monday that its executive board has approved a nearly $3 billion bailout program for Sri Lanka over four years to help salvage the country’s bankrupt economy.

    About $333 million will be disbursed immediately and the approval will also open up financial support from other institutions, the IMF said.

    “Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities,” its statement quoted IMF Managing Director Kristalina Georgieva as saying.

    “Institutions and governance frameworks require deep reforms. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported program with strong ownership for the reforms is critical.”

    The approval will unlock financing of up to $7 billion from the IMF and other international multilateral financial institutions, President Ranil Wickremesinghe’s office said.

    Earlier this month, the last hurdle for the approval was cleared when China joined Sri Lanka’s other creditors in providing debt restructuring assurances.

    “From the very start, we committed to full transparency in all our discussions with financial institutions and with our creditors,” Wickremesinghe said in a statement from his office. “I express my gratitude to the IMF and our international partners for their support as we look to get the economy back on track for the long term through prudent fiscal management and our ambitious reform agenda.”

    Wickremesinghe said he has made some tough decisions to ensure stability, debt sustainability and to grow an inclusive and internationally attractive economy.

    Sri Lanka increased income taxes sharply and removed electricity and fuel subsidies, fulfilling prerequisites of the IMF program. Authorities must now discuss with Sri Lanka’s creditors on how to restructure its debt.

    “Having obtained specific and credible financing assurances from major official bilateral creditors, it is now important for the authorities and creditors to make swift progress towards restoring debt sustainability consistent with the IMF-supported program,” Georgieva said.

    “The authorities’ commitments to transparently achieve a debt resolution, consistent with the program parameters and equitable burden sharing among creditors in a timely fashion, are welcome,” she said.

    Sri Lanka last year suspended repayment of its foreign debt amid a severe foreign currency crisis, because of a fall in tourism and export revenue due to the COVID-19 pandemic, megaprojects funded by Chinese loans that did not generate income, and releasing foreign currency reserves to hold the exchange rates for a longer period.

    The currency crisis created severe shortages of some foods, fuel, medicine and cooking gas, leading to angry street protests that forced then-President Gotabaya Rajapaksa to flee the country and resign.

    Since Wickremesinghe took over, he has managed to reduce shortages and ended hours-long daily power cuts. The Central Bank says its reserves have improved and the black market no longer controls the foreign currency trade.

    However, Wickremesinghe’ s government is likely to face hostility from trade unions over his plans to privatize state ventures as part of his reform agenda and public resentment may increase if he fails to take action against the Rajapaksa family, who people believe were responsible for the economic crisis.

    Wickremesinghe’s critics accuse him of shielding the Rajapaksa family, who still control a majority of lawmakers in Parliament, in return for their support for his presidency.

    ___

    Find more AP Asia-Pacific coverage at https://apnews.com/hub/asia-pacific

    [ad_2]

    Source link

  • UBS to buy Credit Suisse for nearly $3.25B to calm turmoil

    UBS to buy Credit Suisse for nearly $3.25B to calm turmoil

    [ad_1]

    GENEVA — Banking giant UBS is buying troubled rival Credit Suisse for almost $3.25 billion, in a deal orchestrated by regulators to stave off further market-shaking turmoil in the global banking system.

    Swiss authorities urged UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to reassure investors and the bank’s customers. Shares of Credit Suisse and other banks plunged after the failure of two banks in the U.S. raised questions about other potentially shaky global financial institutions.

    Credit Suisse is among 30 financial institutions known as globally systemically important banks, and authorities worried about the fallout if it were to fail.

    The deal was “one of great breadth for the stability of international finance,” Swiss President Alain Berset said as he announced it Sunday night. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

    Switzerland’s executive branch, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without shareholder approval.

    Markets remain jittery despite the best efforts of regulators to restore calm. Shares fell Monday in Asia, with Hong Kong’s Hang Seng index down 2.7% and Tokyo’s benchmark Nikkei 225 losing 1.2%. Bank shares in the region were lower and futures in London and Frankfurt also fell.

    Credit Suisse Chairman Axel Lehmann called the sale to UBS “a clear turning point.”

    “It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets,” Lehmann said, adding that the focus is now on the future and on Credit Suisse’s 50,000 employees, 17,000 in Switzerland.

    Following news of the Swiss deal, the world’s central banks announced coordinated moves to stabilize banks, including access to a lending facility for banks to borrow U.S. dollars if they need them, a practice widely used during the 2008 crisis. Three months after Lehman Brothers collapsed in September of 2008, such swap lines had been tapped for $580 billion. Swap lines also were rolled out during market turmoil in the early stages of the COVID-19 pandemic.

    “Today is one of the most significant days in European banking since 2008, with far-reaching repercussions for the industry,” said Max Georgiou, an analyst at Third Bridge. “These events could alter the course of not only European banking but also the wealth management industry more generally.”

    Colm Kelleher, the UBS chairman, hailed “enormous opportunities” from the takeover and highlighted his bank’s “conservative risk culture” — a subtle swipe at Credit Suisse’s reputation for more swashbuckling gambles in search of bigger returns. He said the combined group would create a wealth manager with over $5 trillion in total invested assets.

    UBS officials said they plan to sell off parts of Credit Suisse or reduce the bank’s size.

    Swiss Finance Minister Karin Keller-Sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.”

    The combination of the two biggest and best-known Swiss banks, each with storied histories dating to the mid-19th century, amounts to a thunderclap for Switzerland’s reputation as a global financial center — putting it on the cusp of having a single national banking champion.

    The deal follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent further panic.

    European Central Bank President Christine Lagarde lauded the “swift action” by Swiss officials, saying they were “instrumental for restoring orderly market conditions and ensuring financial stability.”

    She reiterated that the European banking sector is resilient, with strong financial reserves and plenty of ready cash. The banks “are in a completely different position from 2008” during the financial crisis, partly because of stricter government regulation, she said.

    The Swiss government is providing more than 100 billion francs to support the takeover.

    As part of the deal, approximately 16 billion francs ($17.3 billion) in Credit Suisse bonds will be wiped out. European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of distress. The bonds are designed to be wiped out if a bank’s capital falls below a certain level, and that was triggered by the government-brokered deal.

    Berset said the Federal Council had been discussing Credit Suisse’s troubles since early this year and held urgent meetings last week.

    Investors and banking industry analysts were still digesting the deal, but at least one analyst suggested the deal might tarnish Switzerland’s global banking image.

    “A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away,” said Octavio Marenzi, CEO of consulting firm Opimas LLC, in an email.

    The Financial Stability Board, an international body that monitors the global financial system, designated Credit Suisse as one of the world’s important banks, meaning that regulators feared a collapse could ripple throughout the financial system like that of Lehman Brothers 15 years ago.

    The Credit Suisse parent bank is not part of European Union supervision, but it has entities in several European countries that are.

    Credit Suisse’s troubles resurfaced after it reported managers had identified “material weaknesses” in its internal controls on financial reporting. That fanned fears it would be the next domino to fall. Many of its problems are unique and unlike the weaknesses that brought down Silicon Valley Bank and Signature Bank. Their failures led to significant rescue efforts by the Federal Deposit Insurance Corp. and the Federal Reserve to prevent a crisis similar to what occurred in 2008.

    Credit Suisse’s shares plunged Wednesday to a record low after its largest investor, the Saudi National Bank, said it wouldn’t invest any more money in the bank to avoid tripping regulations that would kick in if its stake rose about 10%.

    On Friday, its shares dropped 8% to close at 1.86 francs ($2) on the Swiss exchange. The stock has seen a long downward slide: It traded at more than 80 francs in 2007.

    UBS is bigger but Credit Suisse still wields considerable influence, with $1.4 trillion assets under management. It has significant trading desks around the world, caters to the rich through its wealth management business, and is a major mergers and acquisitions advisor. The bank did weather the 2008 financial crisis without assistance, unlike UBS.

    Credit Suisse is seeking to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.

    ___

    Associated Press Writers Frank Jordans and Emily Schultheis in Berlin, Barbara Ortutay in Oakland, Calif., Chris Rugaber in Washington, Ken Sweet in New York and David McHugh in Frankfurt, Germany, contributed.

    [ad_2]

    Source link

  • New York Community Bank to buy failed Signature Bank

    New York Community Bank to buy failed Signature Bank

    [ad_1]

    New York Community Bank has agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday

    ByKEN SWEET AP Business Writer

    NEW YORK — New York Community Bank has agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday.

    The 40 branches of Signature Bank will become Flagstar Bank, starting Monday. Flagstar is one of New York Community Bank’s subsidiaries. The deal will include the purchase of $38.4 billion in Signature Bank’s assets, a little more than a third of Signature’s total when the bank failed a week ago.

    The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

    Signature Bank was the second bank to fail in this banking crisis, roughly 48 hours after the collapse of Silicon Valley Bank. Signature, based in New York, was a large commercial lender in the tristate area, but had in recent years gotten into cryptocurrencies as a potential growth business.

    After Silicon Valley Bank failed, depositors became nervous about Signature Bank’s health due to its high amount of uninsured deposits as well as its exposure to crypto and other tech-focused lending. By the time it was closed by regulators, Signature was the third largest bank failure in U.S. history.

    The FDIC says it expects Signature Bank’s failure to cost the deposit insurance fund $2.5 billion, but that figure may change as the regulator sells off assets. The deposit insurance fund is paid for by assessments on banks and taxpayers do not bear the direct cost when a bank fails.

    [ad_2]

    Source link

  • New York Community Bank to buy failed Signature Bank

    New York Community Bank to buy failed Signature Bank

    [ad_1]

    New York Community Bank has agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday

    ByKEN SWEET AP Business Writer

    NEW YORK — New York Community Bank has agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday.

    The 40 branches of Signature Bank will become Flagstar Bank, starting Monday. Flagstar is one of New York Community Bank’s subsidiaries. The deal will include the purchase of $38.4 billion in Signature Bank’s assets, a little more than a third of Signature’s total when the bank failed a week ago.

    The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

    Signature Bank was the second bank to fail in this banking crisis, roughly 48 hours after the collapse of Silicon Valley Bank. Signature, based in New York, was a large commercial lender in the tristate area, but had in recent years gotten into cryptocurrencies as a potential growth business.

    After Silicon Valley Bank failed, depositors became nervous about Signature Bank’s health due to its high amount of uninsured deposits as well as its exposure to crypto and other tech-focused lending. By the time it was closed by regulators, Signature was the third largest bank failure in U.S. history.

    The FDIC says it expects Signature Bank’s failure to cost the deposit insurance fund $2.5 billion, but that figure may change as the regulator sells off assets. The deposit insurance fund is paid for by assessments on banks and taxpayers do not bear the direct cost when a bank fails.

    [ad_2]

    Source link

  • New York Community Bank buys assets of Signature Bank. FDIC estimates the bank’s failure will cost insurance fund $2.5B

    New York Community Bank buys assets of Signature Bank. FDIC estimates the bank’s failure will cost insurance fund $2.5B

    [ad_1]

    New York Community Bank buys assets of Signature Bank. FDIC estimates the bank’s failure will cost insurance fund $2.5B

    NEW YORK — New York Community Bank buys assets of Signature Bank. FDIC estimates the bank’s failure will cost insurance fund $2.5B.

    [ad_2]

    Source link

  • UBS to buy Credit Suisse for nearly $3.25B to calm turmoil

    UBS to buy Credit Suisse for nearly $3.25B to calm turmoil

    [ad_1]

    GENEVA — Banking giant UBS is buying troubled rival Credit Suisse for almost $3.25 billion, in a deal orchestrated by regulators in an effort to avoid further market-shaking turmoil in the global banking system.

    Swiss authorities pushed for UBS to take over its smaller rival after a plan for Credit Suisse to borrow up to 50 billion francs ($54 billion) failed to reassure investors and the bank’s customers. Shares of Credit Suisse and other banks plunged this week after the failure of two banks in the U.S. sparked concerns about other potentially shaky institutions in the global financial system.

    Credit Suisse is among the 30 financial institutions known as globally systemically important banks, and authorities worried about the fallout if it were to fail.

    The deal was “one of great breadth for the stability of international finance,” said Swiss President Alain Berset as he announced the deal Sunday night. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

    Switzerland’s executive branch, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without shareholder approval. Following news of the Swiss deal, the world’s central banks announced coordinated financial moves to stabilize banks in the coming week. This includes daily access to a lending facility to backstop banks looking to borrow U.S. dollars if they need them, a practice which was widely used during the 2008 financial crisis.

    Credit Suisse Chairman Axel Lehmann called the deal “a clear turning point.”

    “It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets,” Lehmann said, adding that the focus is now on the future and in particular on the 50,000 Credit Suisse employees, 17,000 of whom are in Switzerland.

    Colm Kelleher, the UBS chairman, hailed the “enormous opportunities” that emerge from the takeover, and highlighted his bank’s “conservative risk culture” — a subtle swipe at Credit Suisse’s reputation for more swashbuckling, aggressive gambles in search of bigger returns. He said the combined group would create a wealth manager with over $5 trillion in total invested assets.

    Swiss Finance Minister Karin Keller-Sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.”

    The combination of the two biggest and best-known Swiss banks, each with storied histories dating to the mid-19th century, amounts to a thunderclap for Switzerland’s reputation as a global financial center — leaving it on the cusp of having a single national champion in banking.

    The deal follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further panic. Still, global financial markets have been on edge since Credit Suisse’s share price began plummeting this week.

    European Central Bank President Christine Lagarde lauded the “swift action” by Swiss officials, saying they were “instrumental for restoring orderly market conditions and ensuring financial stability.”

    She said the banks “are in a completely different position from 2008” during the financial crisis, partly because of stricter government regulation.

    UBS officials said they plan to sell off parts of Credit Suisse or reduce the bank’s size in the coming months and years.

    The Swiss government is providing more than 100 billion francs in aid and financial backstops to make the deal go through.

    A part of the deal, approximately 16 billion francs ($17.3 billion) in Credit Suisse bonds will be wiped out. European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of distress. But these bonds are designed to be wiped out if a bank’s capital falls below a certain level, which was triggered as part of this government-brokered deal.

    Berset said the Federal Council had already been discussing a long-troubled situation at Credit Suisse since the beginning of the year and held urgent meetings in the last four days amid spiraling concerns about its financial health that caused major swoons in its stock price and raised the specter of the 2007-08 financial crisis.

    Investors and banking industry analysts we`re still digesting the deal, but one analyst was sour on the news due to the reputational damage the deal might have on Switzerland’s global banking image.

    “A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away,” said Octavio Marenzi, CEO of consulting firm Opimas LLC, in an email.

    Credit Suisse is designated by the Financial Stability Board, an international body that monitors the global financial system, as one of the world’s important banks. This means regulators believe its uncontrolled failure would lead to ripples throughout the financial system not unlike the collapse of Lehman Brothers 15 years ago.

    The Credit Suisse parent bank is not part of European Union supervision, but it has entities in several European countries that are. Lagarde reiterated what she said last week after the central bank raised interest rates — that the European banking sector is resilient, with strong financial reserves and plenty of ready cash.

    Many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corp. and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.

    The deal caps a highly volatile week for Credit Suisse, most notably on Wednesday when its shares plunged to a record low after its largest investor, the Saudi National Bank, said it wouldn’t invest any more money into the bank to avoid tripping regulations that would kick in if its stake rose about 10%.

    On Friday, shares dropped 8% to close at 1.86 francs ($2) on the Swiss exchange. The stock has seen a long downward slide: It traded at more than 80 francs in 2007.

    Its current troubles began after Credit Suisse reported on Tuesday that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned fears that Credit Suisse would be the next domino to fall.

    While smaller than its Swiss rival UBS, Credit Suisse still wields considerable influence, with $1.4 trillion assets under management. The firm has significant trading desks around the world, caters to the rich and wealthy through its wealth management business, and is a major advisor for global companies in mergers and acquisitions. Notably, Credit Suisse did not need government assistance in 2008 during the financial crisis, while UBS did.

    The Swiss bank has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.

    ___

    Associated Press Writers Frank Jordans and Emily Schultheis in Berlin, Barbara Ortutay in Oakland, Calif., Chris Rugaber in Washington and David Mchugh in Frankfurt, Germany contributed.

    [ad_2]

    Source link

  • UBS to buy Credit Suisse for $3.2 billion to rein in turmoil

    UBS to buy Credit Suisse for $3.2 billion to rein in turmoil

    [ad_1]

    GENEVA — Banking giant UBS is buying its smaller rival Credit Suisse for $3.2 billion in an effort to avoid further market-shaking turmoil in global banking, Swiss President Alain Berset announced Sunday night.

    The deal was “one of great breadth for the stability of international finance,” Berset said. “An uncontrolled collapse of Credit Suisse would lead to incalculable consequences for the country and the international financial system.”

    The Swiss Federal Council, a seven-member governing body that includes Berset, passed an emergency ordinance allowing the merger to go through without the approval of shareholders.

    Credit Suisse Chairman Axel Lehmann called the deal “a clear turning point.”

    “It is a historic, sad and very challenging day for Credit Suisse, for Switzerland and for the global financial markets,” Lehmann said, adding that the focus is now on the future and in particular on the 50,000 Credit Suisse employees, 17,000 of whom are in Switzerland.

    Colm Kelleher, the UBS chairman, hailed the “enormous opportunities” that emerge from the takeover, and highlighted his bank’s “conservative risk culture” — a subtle swipe at a Credit Suisse culture that’s known for more swashbuckling, aggressive gambles on bigger returns. He said the combined group would create a wealth manager with over $5 trillion in total invested assets.

    Swiss Finance Minister Karin Keller-Sutter said the council “regrets that the bank, which was once a model institution in Switzerland and part of our strong location, was able to get into this situation at all.”

    The combination of the two biggest and best-known Swiss banks, each with storied histories dating to the mid-19th century, amounts to a thunderclap for Switzerland’s reputation as a global financial center — leaving it on the cusp of having a single national champion in banking.

    The deal follows the collapse of two large U.S. banks last week that spurred a frantic, broad response from the U.S. government to prevent any further bank panics. Still, global financial markets have been on edge since Credit Suisse’s share price began plummeting this week.

    European Central Bank President Christine Lagarde lauded the “swift action” by Swiss officials, saying they were “instrumental for restoring orderly market conditions and ensuring financial stability.”

    She said the banks “are in a completely different position from 2008” during the financial crisis, partly because of stricter government regulation.

    While UBS is buying Credit Suisse, UBS officials said they plan to sell off parts of it or reduce the size of the bank in the coming months and years.

    The Swiss central bank agreed to loan Credit Suisse up to 50 billion francs ($54 billion) on Thursday, temporarily boosting its shares, but that was not enough to halt the market swings and stem a loss of deposits, according to news reports.

    “We noted that the outflows of liquidity and the volatility of the markets demonstrated that necessary confidence could no longer be restored, and a rapid solution guaranteeing stability was essential,” Berset said.

    On Sunday, the Swiss central bank said it would provide a loan of 100 billion Swiss francs ($108 billion) backed by a federal default guarantee to support the deal, which is expected to be completed by the end of the year.

    A part of the deal, approximately 16 billion francs ($17.3 billion) in Credit Suisse bonds will be wiped out. European bank regulators use a special type of bond designed to provide a capital cushion to banks in times of distress. But these bonds are designed to be wiped out if a bank’s capital falls below a certain level, which was triggered as part of this government-brokered deal.

    Berset said the Federal Council had already been discussing a long-troubled situation at Credit Suisse since the beginning of the year and held urgent meetings in the last four days amid spiraling concerns about its financial health that caused major swoons in its stock price and raised the specter of the 2007-08 financial crisis.

    Investors and banking industry analysts we`re still digesting the deal, but one analyst was sour on the news due to the reputational damage the deal might have on Switzerland’s global banking image.

    “A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away,” said Octavio Marenzi, CEO of consulting firm Opimas LLC, in an email.

    Marenzi added he expected Switzerland’s direct democracy governmental model is likely to result in court and ballot challenges for this deal, potential leading to more chaos.

    Credit Suisse is designated by the Financial Stability Board, an international body that monitors the global financial system, as one of the world’s important banks. This means regulators believe its uncontrolled failure would lead to ripples throughout the financial system not unlike the collapse of Lehman Brothers 15 years ago.

    The Credit Suisse parent bank is not part of European Union supervision, but it has entities in several European countries that are. Lagarde reiterated what she said last week after the central bank raised interest rates — that the European banking sector is resilient, with strong financial reserves and plenty of ready cash.

    Many of Credit Suisse’s problems are unique and do not overlap with the weaknesses that brought down Silicon Valley Bank and Signature Bank, whose failures led to a significant rescue effort by the Federal Deposit Insurance Corp. and the Federal Reserve. As a result, their downfall does not necessarily signal the start of a financial crisis similar to what occurred in 2008.

    The deal caps a highly volatile week for Credit Suisse, most notably on Wednesday when its shares plunged to a record low after its largest investor, the Saudi National Bank, said it wouldn’t invest any more money into the bank to avoid tripping regulations that would kick in if its stake rose about 10%.

    On Friday, shares dropped 8% to close at 1.86 francs ($2) on the Swiss exchange. The stock has seen a long downward slide: It traded at more than 80 francs in 2007.

    Its current troubles began after Credit Suisse reported on Tuesday that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned fears that Credit Suisse would be the next domino to fall.

    While smaller than its Swiss rival UBS, Credit Suisse still wields considerable influence, with $1.4 trillion assets under management. The firm has significant trading desks around the world, caters to the rich and wealthy through its wealth management business, and is a major advisor for global companies in mergers and acquisitions. Notably, Credit Suisse did not need government assistance in 2008 during the financial crisis, while UBS did.

    The Swiss bank has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds, repeated shake-ups of its top management and a spying scandal involving UBS.

    ___

    Associated Press Writers Frank Jordans and Emily Schultheis in Berlin, Barbara Ortutay in Oakland, Calif., and Chris Rugaber in Washington contributed.

    [ad_2]

    Source link

  • ‘Be mindful of your risk’: Money manager tackles Silicon Valley Bank fallout on ETFs

    ‘Be mindful of your risk’: Money manager tackles Silicon Valley Bank fallout on ETFs

    [ad_1]

    There’s speculation the Silicon Valley Bank collapse could expose problems lurking in ETFs tied to specific sectors.

    Astoria Portfolio Advisors CIO John Davi has financials topping his watch list.

    “You need to be mindful of your risk,’” Davi, who runs the AXS Astoria Inflation Sensitive ETF, told CNBC’s “ETF Edge” this week. The fund is an ETF.com 2023 “ETF of the Year” finalist.

    Davi contends the Financial Select Sector SPDR ETF (XLF) could be among the biggest near-term laggards. It tracks the S&P 500 financial index.

    His firm sold the ETF’s positions in regional banks this week and bought larger cap banks, according to Davi. He sees bigger institutions as a more stable, multiyear investment.

    The XLF ended the week more than 3% lower. It’s down almost 8% since the SVB collapse March 10.

    [ad_2]

    Source link

  • Parent company of Silicon Valley Bank files for bankruptcy

    Parent company of Silicon Valley Bank files for bankruptcy

    [ad_1]

    The parent company of Silicon Valley Bank filed for Chapter 11 bankruptcy protection Friday, a week after the tech-focused bank failed in a sudden collapse that set off fears of wider problems in the global banking system.

    The filing from SVB Financial Group was widely expected, with much of the company now under the control of banking regulators. The bank was seized last week by the federal government.

    In other developments, the bank, its CEO and its chief financial officer were targeted in a class action lawsuit that claims the company did not disclose the risks that future interest rate increases would have on its business.

    SVB Financial Group is no longer affiliated with Silicon Valley Bank after the bank was taken over by the Federal Deposit Insurance Corporation. The bank’s successor, Silicon Valley Bridge Bank, was not included in the Chapter 11 filing.

    The bankruptcy filing by SVB Financial Group creates a legal battle over the bank’s remaining assets between the creditors of the holding company and regulators who are looking to make depositors whole.

    SVB Financial Group believes it has approximately $2.2 billion of liquidity. It also said it has other valuable securities and assets that are being considered for sale.

    “The Chapter 11 process will allow SVB Financial Group to preserve value as it evaluates strategic alternatives for its prized businesses and assets,” William Kosturos, chief restructuring officer for SVB Financial Group, said in a statement.

    Those assets include SVB Capital, the company’s venture capital and private credit fund, and SVB Securities, a regulated broker-dealer. Both continue to operate and have sources of funding, the company said.

    The Wall Street Journal reported that a group of distressed debt investors — mostly hedge funds — bought the bonds of Silicon Valley Bank’s holding company in a bet that that there will be some proceeds for bondholders after the bankruptcy process is completed.

    The shuttering of Silicon Valley Bank on March 10 and of New York’s Signature Bank two days later revived memories of the financial crisis that plunged the United States into the Great Recession almost 15 years ago.

    Determined to restore public confidence in the banking system, the federal government moved last weekend to protect all the banks’ deposits, even those that exceeded the FDIC’s $250,000 limit per individual account.

    During the 2008 crisis, the parent companies of failed banks Washington Mutual and IndyMac also filed for bankruptcy protection in the days after their operations failed.

    [ad_2]

    Source link

  • Stocks slip as worries worsen about banks, still up for week

    Stocks slip as worries worsen about banks, still up for week

    [ad_1]

    NEW YORK — Stocks are slipping on Wall Street Friday as worries worsen about the banking industry and a week of turmoil nears its close.

    The S&P 500 was 0.4% lower in early trading, cutting into its gain for the week. The Dow Jones Industrial Average was down 229 points, or 0.7%, at 32,017, as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.2% lower.

    This week has been a whipsaw for markets around the world as worries rise about the banking industry following the second- and third-largest U.S. bank failures in history. Just a day earlier, markets rallied in relief after two banks on both sides of the Atlantic tapped into tens of billions of dollars of cash to bolster their finances.

    But on Friday, some of the hope was washing out, and the pair were back to falling. In Switzerland, Credit Suisse shares dropped 8.5%. On Wall Street, shares of First Republic Bank sank nearly 20% and were on their way to a 66% plunge for the week.

    The two banks have different sets of issues challenging them, but the overriding fear is that the banking system may be cracking under the weight of the fastest set of hikes to interest rates in decades.

    Analysts have been quick to say the current chaos for banks looks nowhere near as bad as the 2007-08 financial crisis that ruined the global economy. But the troubles still feed into concerns about a recession because problems for banks could mean problems for smaller and mid-sized companies getting the loans they need to grow.

    In “the biggest picture: since 1870 there have been 14 big world recessions, all driven by wars, pandemics & banking crises,” investment strategist Michael Hartnett wrote in a BofA Global Research report.

    Banks have borrowed nearly $165 billion from the Federal Reserve over the last week in a sign of how much stress is in the system.

    After years of enjoying historically easy conditions, banks and the economy are now getting a shock to the system after the Federal Reserve and other central banks have jacked up interest rates at a blistering pace. The moves are meant to get the world’s high inflation under control.

    Higher rates can indeed help tame inflation by slowing the economy, but they raise the risk of a recession later on. They also hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank, which collapsed Friday. High races had undercut the value of its bond investments.

    Since then, Wall Street has tried to root out banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    That’s why Wall Street has been so keyed in on San Francisco-based First Republic. A group of 11 of the biggest banks on Thursday said they would deposit a combined $30 billion in the bank to show their confidence in it and banks in general.

    “The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right,” Stephen Innes of SPI Asset Management said in a report.

    Some of the wildest action has been in the bond market, where yields have swung as traders drastically recalibrate bets for where the Fed will take rates.

    The yield on the two-year Treasury, which tends to closely track expectations for the Fed, fell to 4.01% from 4.17% late Thursday. It was above 5% last week and at its highest level since 2007. That’s a massive move for the bond market.

    Traders largely expect this week’s turmoil to push the Federal Reserve to hike interest rates at its next meeting by only a quarter of a percentage point. That would be the same sized increase as last month’s and half the hike of 0.50 points that was expected earlier.

    Such easing expectations have helped several Big Tech stocks to lead the market this week. They’ve had their own problems, but they tend to benefit from lower interest rates. Partly because of that, the S&P 500 is still on track for its best weekly gain since January. It’s up 2.1%.

    Cryptocurrencies have shot even higher this week. Bitcoin is up more than 30%.

    The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    ___

    AP Business Writers Elaine Kurtenbach and Matt Ott contributed.

    [ad_2]

    Source link

  • Asian shares up after First Republic aid spurs Wall St rally

    Asian shares up after First Republic aid spurs Wall St rally

    [ad_1]

    BANGKOK — Shares advanced Friday in Asia, tracking a rally on Wall Street after a group of big banks offered a lifeline to First Republic Bank, the lender investors had focused on in their latest hunt for troubles in the banking industry.

    Benchmarks rose more than 1% in Hong Kong, Taiwan and Tokyo. U.S. futures were mixed and oil prices climbed.

    The S&P 500 jumped 1.8% Thursday, erasing earlier losses following reports that First Republic Bank could get help or sell itself to another bank. Markets have gyrated this week on concerns over the toll on banks from the fastest set of interest rate hikes in decades. The turmoil flared with last week’s collapse of Silicon Valley Bank, the second largest bank failure in U.S. history.

    “The market remains cautious; traders do not want to get overexcited, especially with investors still focusing on what can go wrong instead of what could go right,” Stephen Innes of SPI Asset Management said in a report.

    In Asia, Hong Kong’s Hang Seng jumped 1.1% to 19,422.81 and the Shanghai Composite index added 0.8% to 3,249.23.

    Tokyo’s Nikkei 225 index gained 1.2% to 27,333.79 and the Kospi in Seoul was up 0.7% at 2,394.27. Shares in major Japanese banks, which fell sharply at times this week, were mostly slightly higher.

    Australia’s S&P/ASX 200 added 0.4% to 6,994.80. India’s Sensex was 0.1% higher while Taiwan’s Taiex surged 1.5%.

    Stocks rallied Thursday on Wall Street after 11 of the biggest banks offered help for First Republic with a combined deposit of $30 billion.

    All told, the S&P 500 rose 68.35 points to 3,960.28. The Dow gained 1.2% to 32,246.55 and the Nasdaq jumped 2.5% to 11,717.28.

    Since SVB’s failure, investors have been on the lookout for banks with similar traits, such as lots of depositors with more than the $250,000 limit that’s insured by the Federal Deposit Insurance Corp., or lots of tech startups and other highly connected people that can spread worries about a bank’s strength quickly.

    First Republic Bank rose 10% Thursday after slumping as much as 36% early in the day.

    The Federal Reserve’s fastest barrage of hikes to interest rates in decades, to drive down inflation, has shocked the banking system following years of historically easy conditions.

    Higher rates raise the risk of a recession later on and hurt prices for stocks, bonds and other investments. That latter factor was one of the issues hurting Silicon Valley Bank because high rates forced down the value of its bond investments.

    U.S. Treasury Secretary Janet Yellen told a Senate committee on Thursday that the nation’s banking system “remains sound” and Americans “can feel confident” about their deposits.

    Wall Street increasingly expects this week’s turmoil to push the Federal Reserve to hike interest rates next week by only a quarter of a percentage point. That would be the same sized increase as last month’s, half the hike of 0.50 points that was earlier expected.

    The European Central Bank on Thursday raised its key rate by half a percentage point, brushing aside speculation that it may reduce the size because of all the turmoil around banks.

    All the stress in the banking system has raised worries about a potential recession because of how important smaller and mid-sized banks are to making loans to businesses across the country. Oil prices have slid this week on such fears.

    Reports on the U.S. economy are showing mixed signals. A report said fewer workers applied for unemployment benefits last week than expected.

    In other trading, U.S. benchmark crude oil gained 44 cents to $68.79 a barrel in electronic trading on the New York Mercantile Exchange. It picked up 74 cents on Thursday to $68.35 a barrel.

    Brent crude, the pricing basis for international trading, climbed 46 cents to $75.16 a barrel.

    The dollar fell to 132.93 Japanese yen from 133.76 yen. The euro rose to $1.0648 from $1.0611.

    [ad_2]

    Source link