First Republic collapses on Wall Street, JpMorgan- Corriere.it takes the field to rescue

There was no thud. After a week of fibrillation, the European stock exchanges on 20 March, when they reopened, passed the first test by fire following the news of the takeovers of Credit Suisse by Ubs, comforted by the reassurances of the institutions. The same could not be said of the rescued bank, sunk on the Zurich stock exchange, targeted by anger and announcements of lawsuits by investors after the zeroing, by the Swiss regulator Finma, of 16 billion francs of Additional Tier bonds 1, i.e. those who participate in the absorption of a bank’s losses when capital ratios fall below a certain threshold. Meanwhile, overseas, the CEO of JP Morgan, Jamie Dimon, got to work with those of 11 other banks to convert all or part of the $30 billion granted last week to First Republic Bank, hit by $70 billion, into capital of outflows; yesterday down 47% on the Stock Exchange, but Wall Street did not suffer losses: the Dow Jones stopped at +1.2%, the S&P 550 at +0.86%, the Nasdaq at +0.39%.

If the European indices, which started in the red in the morning, then recovered (Milan +1.5%, Paris +1.2%, Frankfurt +1.1%, London +0.9%), the share of the second largest Swiss bank dropped by 55% to 0.82 francs, slightly above the 0.76 francs that rival UBS will pay to buy it with 3 billion, coincidentally about the market value reached yesterday by Credit Suisse (Credit Suisse shareholders will receive one UBS share for every twenty-two of Credit Suisse). Ubs instead closed at +1.3% (17.3 francs), but S&P, while confirming the A- rating, revised its outlook downwards from stable to negative. Marriage of convenience promises to be difficult. The Saudi National Bank — the largest shareholder of Credit Suisse — confirmed a cnbc that he suffered a loss of approximately 80% on his investment. In fact, the Riyadh-based bank holds an approximately 10% stake in Credit Suisse, having invested 1.4 billion francs in the second largest Swiss lender in November, equal to 3.82 Swiss francs per share: a far cry from the exchange of Ubs.

However, yesterday’s turmoil did not silence Frankfurt or Brussels. We find the euro area banking sector resilient, ruled the number one of the ECB, Christine Lagarde. For its part, the European Commission will continue to closely monitor the situation of the banking system, which has strengthened a lot in recent years, a spokesman said, quoting Commissioner Mairead McGuinness. The Credit Suisse affair and the consequences of the collapse of Silicon Valley Bank will then also be at the center of the European Council scheduled for Thursday and Friday. However, the Minister of Economy, Giancarlo Giorgetti, believes that the repercussions for the Italian banking system are insignificant. According to Bloomberg, the Italian financial institutions UniCredit, Banco Bpm, Assicurazioni Generali, Mediobanca, Banca Generali do not have Credit Suisse additional Tier 1 bonds in their portfolios.

The attention instead must be directed outside the Old Continent and to underline it was the governor Ignazio Visco at the Bocconi presentation of the new Business&Finance de the Republic: In Europe we have all the tools to deal with liquidity crises and we do not detect capitalization and liquidity problems in our banks. The European financial system is not directly involved, the problem for us – added Visco – is essentially a problem of contagion risks, because trust is something very impalpable to maintain and supervision is well aware of it. So we must be extremely careful of the financial developments that have taken place outside the euro area which can have an impact and represent a further element of uncertainty, even if the economy – reassured the governor – has shown a higher than expected resilience. The reaction of the authorities was strong and rapid. We must reassure that our rules are strong and valid, said Commissioner Paolo Gentiloni.