2023-04-22 05:42:46
Credit Suisse belonged to those banks labeled “too big to fail”, too big to fail. Like JPMorgan Chase, Bank of China or HSBC, the Swiss bank was one of these 30 behemoth banks, so intertwined in the world economy, that the consequences of their bankruptcy would be so disastrous that they would threaten the entire financial system. .
“Nothing is too big to fail,” replies Myret Zaki. guest in Geopolitisthe economic journalist denounces the excesses of the current system: “If we choose a liberal system, the risk taken is proportional to the loss. We must not try to circumvent that.”
Should it therefore be allowed to sink the number 2 Swiss bank? “When you let a bank go bankrupt, it’s a sting that permanently immunizes. Because the consequences are such that it doesn’t happen again,” says Myret Zaki. The alternative of rescue by the authorities represents, in her view, a long-term miscalculation: “If you save, well, you have to save all the time and you ruin your system. Your whole civilization declines because of this misallocation of resources. state and public finances.
The journalist is particularly concerned about the potential explosive social repercussions of these political strategies. “We can no longer compensate people for the effects of rising prices. We can no longer raise their wages, we can no longer adjust their retirement pension, we can no longer adjust the minimum rate of the 2nd pillar , we can no longer adjust social assistance. And therefore the State, which has helped finance so much, is bankrupt when it comes to helping the population whose interests it is supposed to protect”, deplores she.
To put out the fire
In March, Credit Suisse’s forced marriage to UBS was hastily arranged, with the support of the Federal Council and the help of the Swiss National Bank (SNB), to “preserve financial stability and protect the Swiss economy”. . A total of 259 billion Swiss francs have been committed to the process.
A few days earlier, three American banks, Silvergate, Signature and Silicon Valley Bank went bankrupt. Medium-sized banks active in the specific sector of new technologies. And yet, here too, the government is quick to intervene. Joe Biden himself has guaranteed all savers’ deposits.
Because the objective is to avoid contagion and to see the banks collapse one after the other. To avoid the loss of public confidence, it was therefore necessary to reassure the solidity of the banks and the American and European financial centres.
Sufficient reforms?
Since the 2008 financial crisis, banks have had to comply with new requirements, such as the limitation of speculative activities, the supervision of large banks by central banks or the increase in capital and liquidity. If the Europeans welcome the safeguards put in place in the euro zone, the American Federal Reserve (FED) said it was ready to “identify where to strengthen supervision and regulation”.
In Switzerland, a red card was in any case sent by the Parliament. The National Council symbolically refused to validate the federal guarantees in the takeover of Credit Suisse. The government and Credit Suisse executives have had to face an avalanche of criticism in recent weeks, on the left and on the right. “Once again, the Confederation has had its arm twisted and had to commit public money to assume risks that should be the responsibility of the private sector,” said Les Vert-es State Councilor Adèle Thorens Goumaz. “This disaster was caused by a caste of irresponsible managers and a corporate culture focused on bonuses”, regretted for his part the adviser to the PLR States Thierry Burkart.
>> Read also:
The Federal Council confirms the symbolic value of Parliament’s vote to save Credit Suisse
Shadow banking on the index
Shadow finance is one of the factors pointed to in the Credit Suisse debacle. Parallel finance, outside the official circuit, often very speculative and very risky, in the hands of a myriad of intermediaries (hedge funds, securitization funds, money market funds, pension funds, trusts, etc.). “These players borrow in the short term, taking advantage of rates that have remained extremely low since 2009 and to finally invest at a higher return. And that has created a mountain of speculative credit”, specifies Myret Zaki, author of several books on the question. , notably “Shadow finance has taken control” (Ed. Favre, 2016).
The role of shadow finance in the Credit Suisse debacle
After a decade of low, even negative rates, their sharp rise put an end to easy money. The shock wave put the entire banking system under pressure. “The responsibility of the FED should be pointed out as being number one in this debacle. Because the FED knows very well that when it keeps rates very low, it builds up this mountain of speculative debt”, underlines Myret Zaki.
“Shadow banking” is not illegal in itself, but it escapes all banking regulation. “States have regulated banks, but have not regulated everything around banks, that is to say this non-banking finance. So all that reduces the impact of the security provided by the equity of the banks”, recalls the journalist. In the case of Credit Suisse, it refers to a “very aggressive bearish raid”. “Its action was taken down by hedge funds which speculated on the decline. (…) It was non-banking finance which brought down a traditional bank listed on the stock exchange.”
Shadow finance remains difficult to quantify. It would represent the colossal sum of 63,200 billion dollars, according to the latest report from the Financial Stability Board. The sector’s share would thus be equivalent to nearly half of all global financial assets.
Melanie Ohayon
1682144196
#bank #bankrupt #sting #permanently #immunizes #rts.ch