Pspecific problems or the beginnings of a systemic banking crisis? This is the question posed by current bank failures. Pointing out the flaws in the management and control of the three American regional banks (Silicon Valley Bank, Silvergate, Signature) and the dirty money of Credit Suisse should neither make us forget the more global spring of their difficulties nor lead to overestimating the capacity for resistance. European banks. If the lessons of 2008 had really been learned, central banks would not have to try again to put out the fuse that they themselves lit.
The peculiarities put forward to explain the bank failures of the moment do not mask the global fragility that is affecting the entire banking sector. Admittedly, the evolution of the activity of the three American regional banks followed that of the sectors in which they had specialized in financing: tech for SVB, crypto-assets for Silvergate and Signature. Their balance sheets grew when these sectors were booming, then contracted when they fell. That of SVB has quadrupled, that of Signature has almost tripled in the last five years.
But this movement of expansion-contraction of balance sheets concerns, in reality, the whole of the banking sector and is explained above all by monetary policy. Far from having declined after the 2007-2008 financial crisis, bank balance sheets were swollen by the liquidity that central banks poured in abundantly to manage the financial and then health crisis. In this phase, the banks increased their financing, in particular real estate loans, as well as more risky loans from companies that were already highly indebted, as well as their purchases of securities, in particular public securities. Between 2007 and 2021, assets under management by banks have doubled on average worldwide, according to figures from the Financial Stability Board (2022). Those of other non-banking financial intermediaries increased everywhere, even more strongly.
Accumulated weaknesses
Mechanically, when central banks around the world, with very few exceptions, began to raise their key rates, reduce their liquidity loans to banks and their purchases of securities on the markets, bank balance sheets began to contract. And it is in this contraction phase that the weaknesses accumulated during the expansion phase are revealed.
However, it is not just the specialized business models of small US regional banks that are fragile. Those, however much more diversified, of the big European banks are also. Very focused on the securities markets and the real estate market, they are affected in an even more mechanical way by the rise in rates. They are certainly much more seasoned than the small banks in the active management of their balance sheet on the derivatives markets, where they exchange their risks and in particular that linked to variations in interest rates.
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