Worries amid crisis of confidence in global bank stocks

Investors continue to offload banking shares in many markets, as central banks hike rates

- Chor Khieng Yuit

Global banking stocks are engulfed in a confidence crisis as investors, fearful about the health of the sector, continue to offload their shares.

German lender Deutsche Bank is the latest to be affected by this storm, with its shares down 8.6 per cent on March 24.

Amid the sell-off, central banks in the United States, Switzerland and Britain hiked interest rates last week.

This is raising questions over whether they are tightening monetary policy too much and putting a strain on the global financial system.

The contagion started when two US regional banks, Silicon Valley Bank (SVB) and Signature Bank, collapsed on March 10 and March 12, respectively.

Credit Suisse was dragged in as well when it said on March 14 that it found “material weaknesses” in its financial reporting processes for the years 2021 and 2022.

The “weaknesses”, it added, could result in a misstatement of its financial statements.

In recent years, the Swiss bank has been hit by missteps, including a money-laundering scandal, and exposure to failed family office Archegos Capital and supply chain finance firm Greensill Capital.

It will now be taken over by Swiss banking peer UBS. 

Deutsche Bank became the next victim, with investors selling the stock despite assurances from US and European policymakers that the banking system is “resilient”.

The German lender had turned a corner in 2022 after two major restructuring drives.

Mr Jason Brady, president and chief executive of Thornburg Investment Management, said many market commentators will place the blame on the US Federal Reserve for tightening the screws too hard and hurting the banking sector.