It’s a word we haven’t heard much since the 2008 Financial Crisis: ‘contagion’..The warning blinkers are flashing across global financial markets as regulators moved to shutter two more US banks and one of Europe’s largest and oldest financial institutions flirted with insolvency..Shares of Credit Suisse fell more than 25% in London and Zurich Wednesday after it highlighted “material weaknesses” in its annual report. It had a ripple effect through the entire European banking sector with French giants Societe Generale losing as much as 13% and BNP Paribas another 10%. Spanish and German banks were also hard hit..One analyst suggested the failure of Credit Suisse would be Europe’s “Lehman Brothers moment,” referring to the fall of the US bank in 2008 that prompted hundreds of billions of bailouts and sparked the Great Recession. .The financial angst looks set to spread to North America, where Credit Suisse trades in New York. Dow Jones futures were down more than 500 points ahead of the opening bell at 7:30 MST..It comes after the failure of the second US bank in as many days. On Tuesday regulators moved to seize the assists of New York-based Signature Bank following the collapse of Santa Clara’s Silicon Valley Bank. Up to a half dozen more are considered at risk..Although these were considered to be smaller regional niche players, US President Joe Biden stepped in Monday to assure Americans their savings and mortgages are safe. Experts aren’t quite ready to call it a ‘meltdown,’ but see some stormy waters ahead as central governments move to increase interest rates around the world. Indeed, the European Central Bank was expected to announce a half-a-per cent hike on Wednesday, prior to the latest crisis..Canadian banks are considered even less risky, but the Big Six have all invested heavily in the US in recent years to sidestep Canada’s rigid banking laws that were credited with insulating Canadians from the worst of the 2008 financial crisis..TD has the largest US exposure, largely through its Waterhouse platform, but others, like RBC, made forays into the US market as well. Still, TD shares were holding up reasonably well on the Toronto Stock Exchange this week, losing only 3% since Monday, closing at $20.62 yesterday. RBC meanwhile, lost about 2.7% in the same period, closing at $18.60..Finance Minister Chrystia Freeland reportedly met with both the Central Bank and the country’s banking regulator Tuesday ahead of the federal budget. According to a statement from her office she assured them both that Canada’s finance sector remains strong.."Significant structural and regulatory safeguards … are stable and resilient," it said.
