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Asset management and fund structuring boutique

Global shockwave

Mar 14, 2023

Global financial stocks have lost $465 billion in market value in two days as investors run for the exits. The mood remains downbeat throughout Asia this morning. The banks that considered the weakest are being hurt most. Close to home, Credit Suisse Group’s stock lost 9.6% on Monday. What is more worrying to us is that the cost of insuring Credit Suisse bonds against default climbed to an all-time high close to the make-or-break level of 5%. Credit Suisse, like SVB, has significant problems on its own. For us at ECP we draw 3 conclusions : 1/ depositors wake up to counterparty risk and withdraw liquidity from the weakest banks 2/ we therefore look out for opportunities as babies will necessarily be thrown out with the bathwater and 3/ Central bankers will include the risk of a disruptive choc in the banking industry in their deliberations on the level of future rate rises as no central banker wants to go down in history as the one breaking the banking system in his fight against inflation.

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