Bank failures send a strong reminder of global financial crisis
- But Hong Kong lenders are well capitalised, far surpassing local or even international requirements set by regulators
Financial turbulence has added a new dimension to this week’s rate-setting meeting of the United States Federal Reserve.
Under pressure from a year of relentless increases in the cost of money, cracks have appeared in the global banking system since it last raised its benchmark rate nearly two months ago. Warning signals came from the collapse of three medium-size American banks. Now the emergency takeover of Swiss banking giant Credit Suisse by UBS raises questions.
Where will the next crack appear and will the Fed hold its rate steady this time, despite persistent inflation, in the face of an alarming slide in global investor confidence in banks?
Not long ago the market was prepared for the Fed to raise its benchmark rate by up to 50 basis points this week. Some have trimmed that expectation to 25 basis points or even none.
The catalyst was the collapse of Silicon Valley Bank after rising rates exposed a mismatch of assets and liabilities, followed by Signature Bank and Silvergate Bank.
After Credit Suisse unveiled a restructure of debt recently, the underlying bank remained sound. But panic-selling, as the world looked for the next vulnerable target, prompted the Swiss National Bank to broker a takeover by UBS.