The ECB hiked rates by half a percentage point Thursday, underlining its determination to fight high inflation of 8.5%. In a statement, the bank called the banking sector in the 20 countries using the euro currency “resilient,” with strong finances.
The troubles at Credit Suisse dragged down the shares of stalwart European lenders such as Deutsche Bank, BNP Paribas and Societe General on Wednesday. Bank shares recovered Thursday. Similar questions are being raised about what the U.S. Federal Reserve will do at its rate meeting next week. The sweeping post-Lehman banking reforms enacted by the European Union forced banks to hold thicker financial cushions against losses and put the biggest banks under the watchful eye of the ECB, taking them away from national supervisors who were considered to have turned a blind eye as problems built up at their home banks.
Credit Suisse, the No. 2 Swiss bank, saw its shares plunge as much as 30% Wednesday after its biggest investor, Saudi National Bank, said it could not provide more financial support. “Having said that, if we had had our conversation a week ago, I would have expressed confidence in U.S. banking supervision as well,” he said, calling the U.S. bank collapses evidence of “a pretty inexplicable supervisory failure” by the U.S. Federal Reserve.
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