Two major European banks worried about contagion look to regulators for reassurance – sources

At least two major European banks are exploring contagion scenarios in the region’s banking sector and expect stronger signals of support from the Federal Reserve and ECB, two senior executives familiar with the deliberations told Reuters.

The fallout from the crisis of confidence at Credit Suisse Group AG and the collapse of two US banks could continue to reverberate in the financial system next week, the two executives told Reuters separately on Sunday.

Both banks held their own internal deliberations over when the European Central Bank should step in to underline banks’ resilience, particularly their capital and liquidity positions, the people said.

A key point in those internal discussions is whether such statements could backfire on banks and cause panic if made too quickly, the people said.

Executives said their banks and the industry were well capitalized and liquidity was strong, but they fear the crisis of confidence will wipe out other creditors.

One of the leaders said the Federal Reserve could be the first to act, as the defaults of Silicon Valley Bank and Signature Bank in the United States have sparked similar concerns in Europe. The ECB declined to comment. A Fed spokesman did not immediately comment.

The ECB on Thursday maintained its plan to raise interest rates by half a point to contain inflation. However, she stressed that she is monitoring tensions in the markets and will respond if necessary to maintain price stability and financial stability in the currency bloc.

Since Credit Suisse is one of the world’s 30 systemically important banks, the problems could spread throughout the financial system, industry executives said.

As regulators seek a resolution to Credit Suisse’s confidence crisis before markets reopen on Monday, a source has warned that talks with UBS Group AG are running into significant hurdles and 10,000 jobs may need to be cut as the two banks consolidate, Reuters reported. .

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