TIROLER TAGESZEITUNG, leading article: "The ghost of 2008", by Max Strozzi

Issue of Friday, March 17, 2023

Innsbruck (OTS) – The banking turmoil on both sides of the Atlantic is shaking confidence in the financial sector and fueling fears of a new banking crisis. Best opportunity to prove that the promises made in 2008 are now being kept.

An individual US case, a special business model, not comparable to other banks and the banking sector is strong in general, everything is cool: the collapse of California’s Silicon Valley Bank was presented as a special case and maybe it is. Nevertheless, the Californian start-up financier, who was only known to those with profound knowledge, managed to send bank stocks plummeting around the world. The major Swiss bank Credit Suisse, on the other hand, is more of a household name in the financial world. It is considered one of 30 systemically important banks in the world. For years, the Swiss bank has suffered a massive loss of trust. From money laundering for the mafia to dealings with dictators and spying, the traditional bank never missed a scandal, and it also lost billions when various hedge funds collapsed. Finally, the Saudi financiers were fed up and withdrew their confidence in the bank. The Swiss central bank jumped in with a huge credit line equivalent to 51 billion euros and de facto saved the bank.
Still cool? Or are financial dramas looming like in 2008? From the outside you can’t see into the heart of the money houses, as the financial crisis showed us impressively at the time. However, banks in Europe now have significantly more reserves than they did 15 years ago, experts assure us. Since then, the financial institutions have undergone various stress tests, which one must expect to keep their promises. At the same time, however, a storm could be brewing, which several financial experts are pointing out: the rapid rise in interest rates is stimulating the interest business again, but is causing the value of low-interest government bonds and other paper that banks have accumulated in recent years to collapse massively . Of course, the tide can turn again over time and all is well.
In any case, the current situation is not confidence-inspiring. The fact that after the SVB bankruptcy the US government felt compelled to emphasize the protection of all deposits with the financial institutions – above and beyond the applicable mark of $250,000 – shows the seriousness of the situation. And yesterday the next piece of news, which doesn’t exactly help to ease the situation: two major US banks are considering helping the US bank First Republic, which has come under pressure, with capital injections.
It doesn’t all sound like 2008, but a crisis of confidence cannot be denied. Now it will be seen whether the homework was really done after the financial collapse in 2008 and whether the promises made back then are kept.