Distressed institutions rush to bolster liquidity: Banking Crisis Update

Emergency liquidity facilities from the Fed are being tapped at home and abroad like there's no tomorrow.

Dear readers,

The Fed has pulled out nearly every stop that doesn’t involve QE or rate cuts to stabilize the financial markets.

The new Bank Term Funding Program which imbues banks with full-value reserves in exchange for their devalued UST and MBS holdings was announced eight days ago. The Fed’s discount window lit up like a Christmas tree last week with a record $152 billion borrowed from the central bank’s emergency loan facility, and now weekly dollar-swap lines with other central banks have been made into a daily facility as funding stress rises and desperation for USD liquidity hits global borrowers too.

Still, these measures haven’t been enough for some. Silvergate, SVB, and Signature failed within three days of one another, and now Credit Suisse has been rescued by UBS in conjunction with the Swiss National Bank in a historic bailout of gargantuan proportions across the pond. With the failure and rescue of Europe’s largest private lender, and another major domestic institution First Republic Bank teetering on the brink, it’s time for an update on the 2023 Global Banking Crisis.

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Headshot in Zurich, fear sweeping San Francisco

Following a week of domestic bank failures and rising tumult in financial markets about who may be next, Credit Suisse, one of the world’s Global Systemically Important Banks (G-SIBs) turned out to be next on the chopping block.

The failure of such an institution would have rocked world financial markets to their core, particularly in Europe where Credit Suisse is the single largest private lender for corporations. A late Sunday night rescue by UBS and the Swiss National Government was concocted and signed into action, disregarding the shareholders of Credit Suisse (many of whom voted against their equity being declared worthless). The deal?