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Is there another global crisis?

“Australians should be reassured that our institutions are solid, our banking sector is well-capitalised.” Treasurer Jim Chalmers
“All indications are that most central banks, including the RBA, may pause for a while or reduce the pace of increase in interest rates.” Professor Fariborz Moshirian, University of NSW
“At this stage there is no need for any concern about the Australian banking system and its resilience.” Professor Fariborz Moshirian

Swiss central bank’s $81 billion lifeline rescues Credit Suisse for now
(See translation in Arabic section)
Sydney - Middle East Times Int’l: After a string of scandals and major investors withdrawing their finances, global investment bank Credit Suisse is in turmoil.
After the collapse of Silicon Valley Bank and Signature Bank in the US, fears are spreading over the stability of the global banking sector, and both investors and markets are on edge.
Overnight, Credit Suisse shares crashed by as much as 30 per cent — a record low for the bank. 
That’s a significant number but there were a couple of reasons behind the drop: Credit Suisse said it had found “material weaknesses” in its financial reporting; and Its largest shareholder said it could not provide further support to the bank by buying more of its shares. 
That all culminated into a sell-off of Credit Suisse shares overnight with stocks crashing by 24 per cent at the close of trade. 
Last year, financial markets were worried about whether Credit Suisse was going to be able to fund itself (and pay its debts), which meant the price of its credit default swaps (or a contract between two parties that allows them to swap or offset their credit risk) surged. 
In recent years the bank was plagued with scandals — including tax evasion, money laundering, the collapse of Greensill Capital and rotating chief executives — and its share price fallen consistently. 
But despite Credit Suisse reassuring the market it had the cash buffers it needed, its share price hasn’t stopped falling, and its customers (largely wealthy clients and businesses, not mum and dad investors) have been steadily taking their money out. 
The bank was provided with a 50 billion Swiss francs ($81 billion) lifeline from the Swiss National Bank which guaranteed funding to ensure Credit Suisse meets its regulatory obligations.
Silicon Valley Bank’s demise came from having too many long-term US Treasury bonds that plunged in value as interest rates rose, and having to sell them at significant losses. Credit Suisse is a victim of longstanding financial weaknesses which it outlined but its troubles have been brewing for a while.
More banks could face challenges because they also hold a lot of their investments in government bonds. 
But chief investment strategist at Barrenjoey, Damien Boey, says it depends on whether what we’re seeing in the markets is systemic amongst banks, or if it’s just “one-off things” for individual banks.
Governments, regulators and central banks around the world are taking steps to prevent another crisis from happening. 
Regulations have also changed since the 2008 global financial crisis which means the world’s biggest investment banks are forced to hold large amounts of cash to survive a future financial crisis.
Treasurer Jim Chalmers says initial advice from regulators is that any fallout for Australia’s broader financial system is unlikely to be significant. 
“Australians should be reassured that our institutions are solid, our banking sector is well-capitalised, and we’re in a better position than most other nations to deal with the challenges we face in the global economy,” he said. 
It’s a view shared by Professor Fariborz Moshirian, a global financial stability expert from the University of New South Wales. 
“At this stage there is no need for any concern about the Australian banking system and its resilience,” he says. 
“The Australian banks are well-capitalised, have access to liquidity and have strong balance sheets.”
Mr Boey also says Australian banks are not majorly exposed to those overseas.
Mr Boey says while there’s minimal risk of any Australian banks collapsing, savings up to a certain point are protected.
Deposits up to $250,000 are protected by a government-backed safety net called the Financial Claims Scheme.
The scheme was introduced during the 2008 global financial crisis to protect consumers in case a lender collapsed. It covers a wide range of deposit accounts including savings and cheque accounts, term deposits and mortgage offset accounts. 
But it only covers banks that are incorporated in Australia and authorised by the banking regulator. 
For any money in your account over the $250,000 limit, you’ll have to claim back through the lender’s liquidation process. 
It’s likely central banks around the world will be watching the banking fallout. 
“All indications are that most central banks, including the RBA, may pause for a while or reduce the pace of increase in interest rates,” says Professor Moshirian. 


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