We’ve seen huge traffic to FT Edit this week from users looking to understand more about the collapse of Silicon Valley Bank, the wobbles at Credit Suisse, and whether there could be a wider banking crisis.
So we turned to Robert Armstrong, the FT’s US financial commentator and lead writer of the Unhedged newsletter, for his take on what to keep an eye on over the next few weeks.
(And if you want more of Rob’s insight, you can sign up for Unhedged here — it’s free for 90 days.)
By Robert Armstrong in New York
A difficult week in banking is ending, but it is not a happy ending. As of this writing (midday Friday New York Time) shares in Credit Suisse and First Republic are down 9 and 17 per cent, respectively. This despite efforts to restore liquidity — and therefore confidence — in the two banks, undertaken by the Swiss National Bank on the one hand and a consortium of the largest US banks on the other.
It would be an exaggeration to say that we are in a banking panic, but nerves are on edge. One indicator of this: a historic surge in US banks tapping the Fed’s “discount window” for cash. Last week, discount window lending passed $150bn, a level not seen even in the great financial crisis.
This does not mean that lots of American banks are insolvent, but it does mean they are taking extraordinary action to make sure they will not become so should jumpy depositors demand their money.
Two things to watch over the weekend and into next week. First, observe the delicate dance performed by bank executives, financial regulators and politicians, who want to provide reassurance but don’t want to make it appear as if a lot of reassurance is necessary. If there are no statements over the weekend, that is probably a good sign.
Next, in Europe, while the public watches Credit Suisse’s stock price, insiders will be watching the bank’s credit default swaps — the price to insure its debt — which have spiked. European and Swiss regulators can likely prevent an outright collapse, and the bank’s core Swiss banking institution may march on. The tough question is, after this latest in a long series of blows to the bank’s reputation, its global wealth management and investment banking operations are viable businesses any more. Who will now place their savings with CS? Who will trade with them?
It’s going to be a fascinating week.
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• John Burn-Murdoch had two very striking pieces in FT Edit this week. The first was about smartphones and a mental health crisis in kids. As a parent of smartphone-aged children, it made for disturbing reading and there is no obvious solution in sight. But the second piece, on an aversion to apartment living in English-speaking countries, was really baffling. Why are the US, UK, Australia and others so committed to houses rather than apartments?
Malcolm Moore (@malcolmmoore)
Editor, FT Edit
• In March last year Oleg, a Russian theatre director in a remote corner of Siberia, received a government request for his actors to record video statements in support of the Ukraine war. He refused — but this was only the start. The requests grew bigger, then they turned into demands, then threats. He quickly found himself navigating an Orwellian minefield of censorship and self-censorship and agonising, near-daily moral reckonings. Oleg’s story is just one of many in Polina Ivanova’s harrowing, humbling tale of the persecution and purges that have decimated Russia’s cultural scene. It is a story that had me asking myself, at every turn, what would I have done?
Deputy editor, FT Edit (@HannahRockFT)
• This was the week when phrases like “excess liquidity” and “unrealised losses” entered into the vernacular. Silicon Valley Bank, now known by all as “SVB,” cratered after the insular tech companies it served hastened the second-largest bank collapse in US history. It’s hard to choose just one article from a week of juicy scoops and interviews from FT’s well-sourced newsroom. If you want to understand how the bank’s rapid decline was actually two years in the making, the spectacular unravelling of the tech industry’s banker tells the story best.
US editor, FT Edit (@CarynAWilson)
Millionaire populations dropped by 12 per cent in New York, 14 per cent in Hong Kong, and 15 per cent in Moscow last year as the rich were driven out by over-regulation, high taxes and hostilities. From These three global cities are pulling ahead
Behind the Money — If you want to understand why Silicon Valley Bank’s collapse is different from the 2008 financial crisis, Behind the Money explains it all.
Weekend pod — Poet Ben Okri talks about the power of poetry, including his moving poem on the Grenfell Tower fire and the intersection of fiction and non-fiction writing.
Working It — The news lately has been dominated by lay-offs at tech companies. The Working It podcast takes a look at how lay-offs happen and whether there’s a better way.
This week the British chancellor Jeremy Hunt unveiled the government’s latest Budget. One of the sectors that will be getting a big injection of cash is childcare. This video reveals the pitfalls of the current, complicated system and asks how it might be fixed.
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