Taoiseach Leo Varadkar has moved to reassure the public about the stability of Irish banks as shares in lenders around the world plunged again on Wednesday amid heightened concerns about embattled Swiss lender Credit Suisse, following the collapse last week of Silicon Valley Bank in the United States.
The Iseq Financial index, dominated by the three remaining Irish banks, fell 6.1 per cent, bringing its losses over the past six days to 16 per cent. The wider European banking sector closed down 6.9 per cent as banks also led Wall Street shares lower.
Speaking to reporters in Washington, Mr Varadkar said Irish authorities were monitoring international developments “very closely”.
“But we’re not concerned about the stability or health of any of our banks,” he added.
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Credit Suisse, which is in the middle of a major restructuring plan after a string of scandals in recent years, plunged as much as 31 per cent to a record low as Saudi National Bank, which anchored a capital raise by the Swiss group late last year to become its biggest shareholder, ruled out increasing its stake from its current level of just under 10 per cent.
Swiss financial authorities issued a statement on Wednesday evening of support to Credit Suisse, saying it continues to meet strict capital and liquidity requirements imposed on systemically important banks, and that the country’s central bank would provide it with liquidity if necessary. It added that recent problems in US banks “do not pose a direct risk of contagion for the Swiss financial markets”.
Three US lenders Silicon Valley Bank, a major backer of tech start-ups, and crypto-focused Signature Bank and Silvergate Bank, have collapsed in the past eight days. A key concern for the wider European banking sector, for now, is how the crisis will affect plans by central banks to continue to raise interest rates.
Irish banks are among the biggest beneficiaries of rising European Central Bank (ECB) rates, as they have higher reliance on interest income than the average euro-zone bank, according to analysts.
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James Buckley, an analyst with Cantor Fitzgerald Ireland, said the implications of the US banking crisis “appears limited for the Irish banks, it has reminded investors of the risks inherent in the sector particularly were the globally economy to go into recession”.
Financial markets now expect ECB president Christine Lagarde to pay heed to banking turmoil and not delivering a promised half-point rate hike on Thursday. Money markets are pricing in a smaller 0.25 of a point rise.
Meanwhile, Larry Fink, the chief executive of Blackrock, the world’s largest asset manager, warned clients on Wednesday that the collapse of Silicon Valley Bank could just be the start of “a “slow rolling crisis” in the US financial system with “more seizures and shutdowns coming”.