Morningstar analysts on Friday called Credit Suisse's problems "idiosyncratic" and said European banks widely were "solid". In Europe, analysts have said it's not a big issue. In Japan - which has been a big buyer of US bonds - regulators raised the issue months ago. But it makes it much more difficult if they need to raise money in a hurry. That is not a problem if they can hold onto the bonds. In the US alone, banks are sitting on roughly $620bn in unrealised losses. The hikes contributed to SVB's issues, making it harder for their start-up customers to borrow money, which left them withdrawing their money at a faster pace.īut the rise in rates - a huge change after years of low-cost borrowing - has created a much wider problem too, hurting the value of long-term bond investments that banks bought when interest rates were lower.
Why are banks collapsing now?Īll this is happening against the backdrop of a much bigger, global change - the sharp rise in borrowing costs over the past year.Ĭentral banks around the world, including the US Federal Reserve and the Bank of England, have been raising interest rates to try to slow the economy and ease the pressure pushing up prices.
In Europe, giant Credit Suisse, which has been troubled for years, accepted an emergency £45bn lifeline from the Swiss central bank. Multi-billion dollar rescue deal for First Republic BankĬredit Suisse to borrow up to $54bn from Swiss central bankīut in a sign of the strains, the US central bank reported a surge in emergency lending to banks looking to boost their funds.
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