Global Banking Worries Send Shockwaves Through Asia's Economies

Asian Stock Markets Plunge as Financial System Fears Intensify

The issues at global banking giant Credit Suisse heightened concerns about a broader bank crisis, which led to stock markets falling across Asia on Thursday.

Key indices in Japan, Hong Kong, and Australia all decreased by more than 1% as bank shares suffered greater losses.

This comes after Credit Suisse announced it will borrow up to 50 billion Swiss francs ($54 billion; £44.5 billion) to strengthen its finances.

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After the bank discovered “weakness” in its financial reporting, shares in the institution fell.

According to the BBC, the Bank of England has communicated with Credit Suisse and the Swiss government to keep tabs on the issue.

The failure of Silicon Valley Bank, the 16th-largest bank in the nation, and the failure of Signature Bank two days later revealed issues in the banking system in the US last week.

Problems at the smaller banks “amplified” developments at Credit Suisse, according to Sayuri Shirai, an economics professor at Keio University in Tokyo, who spoke to the BBC.

“Risk worries both creditors and investors. Banks may experience difficulties in raising capital, which will have an impact on the cost of financing for SMEs and start-ups globally “Added she.

At midday Asian trade, the Nikkei 225 index for Japan decreased by 1.1%. The Topix Banks share index decreased by more than 4% after earlier this week experiencing its worst day in three years.

The nation’s largest lender by assets, Mitsubishi UFJ Financial Group, saw a 3% decline in share price. This was consistent with losses at rival companies Mizuho Financial Group and Sumitomo Mitsui Financial Group.

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Hong Kong and Sydney indexes both had over 1.5% declines, while the Shanghai Composite fell by 0.5%.

Markets may swiftly revert to normal once the US-centric incident is forgotten. More concerns about contagion are currently limited because Asian banks are so much better capitalised “SPI Asset Management’s managing partner, Stephen Innes, said.

Credit Suisse, which was established in 1856, has recently dealt with a number of crises, including accusations of money laundering and other problems.

It has cautioned that it does not anticipate becoming profitable until 2024 after losing money in 2021 and again in 2022.

Investor worries were rekindled by the bank’s Tuesday admission of “material weaknesses” in its financial reporting controls.

When Credit Suisse’s largest shareholder, the Saudi National Bank, announced it would not purchase additional shares of the Swiss bank for regulatory reasons, these got worse.

Credit Suisse maintained at the time that its financial situation was unimportant. But, as other banks hurried to minimise their exposure to the company and prime ministers in Spain and France attempted to allay anxieties, shares in the lender finished Wednesday down 24%.

To “pre-emptively boost its liquidity,” Credit Suisse announced it would borrow up to 50 billion francs from the Swiss central bank on Thursday.

Concerns about the value of bonds held by banks have increased as a result of the failure of Silicon Valley Bank because such bonds lost value due to rising interest rates.

In an effort to reduce inflation, central banks around the world, particularly the US Federal Reserve and the Bank of England, have sharply raised interest rates.

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Banks frequently have sizable bond portfolios, which means they are sitting on sizable potential losses. Until banks are obliged to sell them, value drops in bonds they hold are not necessarily an issue.

The largest failure of a US bank since 2008 occurred when Silicon Valley Bank, which specialised in lending to technology companies, was shut down by US regulators on Friday.

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