Banking wrap-up: What you need to know about the sector’s turmoil

- THE HILL - SYLVAN LANE AND TOBIAS BURNS - MAR 15, 2023 -

Markets took a serious hit Wednesday as the financial sector took a double hit from the continuing fallout from the Silicon Valley Bank (SVB) collapse and the worries over the health of Europe’s second largest bank, Credit Suisse, which appealed to the Swiss government for help.

FILE – Grey clouds cover the sky over a building of the Credit Suisse bank in Zurich, Switzerland, Feb. 21, 2022. (Ennio Leanza/Keystone via AP, File)

The total market capitalization of the six biggest banks in the U.S. is down $183 billion from Feb. 1, driven by the SVB and Signature Bank failures and now by the European bank rout, Bloomberg has calculated.

While emergency U.S. government action over the weekend appeared to soothe some of the angst earlier this week about SVB and Signature Bank, investors and bankers are on high alert now for which segments of the banking sector could be the next to face peril.

The Dow Jones Industrial Average closed with a loss of 280 points Wednesday, finishing the day down 0.9 percent. The S&P 500 closed with a loss of 0.7 percent and the Nasdaq composite edged out a gain of 0.05 percent.

While all three major indexes bounced back from losses of more than 1.5 percent, the fears that shook the market are still lingering.

Here’s what you need to know about how the downfall of Silicon Valley Bank led to a shaking of the entire financial system.

Credit Suisse raises contagion fears

Credit Suisse is the latest major bank to face a crisis of confidence after the collapse of SVB boosted global concerns about the solvency of troubled financial firms.

Shares of Credit Suisse plunged more than 30 percent in European trading Wednesday after an official with the Saudi National Bank — Credit Suisse’s largest shareholder — told Reuters it would not boost its funding of the beleaguered central bank.

The value of Credit Suisse bonds also plummeted and traders piled up on bets that the bank would default.

Credit Suisse officials insisted earlier in the day that the bank was in solid financial shape.

But the bank’s late Wednesday call for help to the Swiss National Bank and the country’s top bank regulator showed how dire the situation has become.

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