First Republic and Credit Suisse shares fall, marking escalation in global bank crisis

In the US, First Republic Bank shares fell 23% despite a $30bn injection. In Europe, Credit Suisse has also lost the market's confidence despite an emergency loan of up to $54bn

US president Joe Biden called for clawing back bank executives' pay and barring bank officials from failed banks. 

The share prices of two troubled banks on both sides of the Atlantic slid again today, Friday, despite receiving billions of dollars in liquidity, marking an escalation in the global banking crisis and prompting calls by US president Joe Biden for tougher actions against bankers.

In the US, First Republic Bank tumbled 23% despite the $30bn (€28.2bn) in deposits injected by Wall St banks that failed to quell investor worries about the beleaguered lender.

Fears of an imminent collapse of First Republic prompted an unprecedented deal put together by power brokers including US Treasury secretary Janet Yellen, Federal Reserve chairman Jerome Powell, and JP Morgan chief executive James Dimon on Thursday.

The rescue package came less than a day after Credit Suisse, one of Europe’s largest lenders, clinched an emergency central bank loan of up to $54bn to shore up its liquidity from the Swiss central bank.

The renewed market slide has sparked speculation that the banking giant will be sold.

Credit Suisse will hold meetings over the weekend to assess scenarios for the bank as it struggles to regain the market’s confidence, Reuters reported. Credit Suisse executives will run through the numbers and formulate scenarios that might reshape its future.

Mr Biden called on Congress to give regulators greater power over the banking sector, including leveraging higher fines for managers, clawing back executives’ compensation, and barring officials from failed banks.

“No one is above the law,” Mr Biden said, “and strengthening accountability is an important deterrent to prevent mismanagement in the future”.

The current US law “limits the administration’s authority to hold executives responsible,” he said.

US data on Thursday showed US banks sought a record of almost $153bn in emergency liquidity from the US central bank over recent days.

That amount surpasses the previous high that was set during the most acute phase of the financial crisis.

The borrowings speak to the “funding and liquidity strains on banks, driven by weakening depositor confidence,” Moody’s said.

The ratings firm had downgraded its outlook on the American banking system to negative earlier this week.

• Reuters and Irish Examiner