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      The Wide Angle – When a banking crisis is not a banking crisis
      THURSDAY, 16/03/2023 - Scope SE & Co. KGaA
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      The Wide Angle – When a banking crisis is not a banking crisis

      The market panic that took hold yesterday does not reflect reality. There is no rational basis to the view that Europe’s large banks are in crisis. The opposite is true.

      You could be forgiven for ignoring this when professional prophets of doom and talking heads remote from the realities on the ground scream from the rooftops that European large banks are close to insolvency and riddled with liquidity problems (very much not the case), that they are poorly regulated (the opposite is true), or that Credit Suisse is “too big to fail but also too big to be saved” (catchy but nonsensical).

      No serious banking expert knowledgeable about the European landscape is saying anything remotely like the system is in crisis. On balance the European banking sector is with few exceptions in its best shape in decades. Liquidity and funding stability remain reassuring, with LCR and NSFR ratios well above regulatory floors.

      Credit Suisse has been an outlier in the European banking landscape for years now. After yesterday’s SNB and FINMA statements, Credit Suisse’s restructuring will be sped up and, if history is a good indicator, it is not far-fetched to assume that parts of the group could be merged into UBS. Fixed-income investors fear that the Credit Suisse restructuring could lead to regulators preventing the group from paying AT1 coupons. Doubtful this will be the case.

      Read Sam Theodore’s latest The Wide Angle.

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