$400bn Is the Cost To Rescue Teetering Global Banks

IANS 21 March 2023

Economy & Nation

Lenders of last resort—central banks—and some of the industry's strongest players provided huge sums of emergency cash to support teetering banks since the global banking crisis began, according to a media report.

More than US$400bh (billion) has gone so far in direct central bank support, CNN reported.

In guaranteeing all deposits at Silicon Valley Bank and Signature Bank, the US Federal Reserve is on the hook for US$140bn.

Then there's the US$54bn the Swiss National Bank offered Credit Suisse in the form of an emergency loan, and 209bn Swiss francs (US$225bn) offered to UBS in loans, guaranteed by the Swiss state, and protection against potential losses, CNN reported.

The US Fed has also agreed to record amounts of loans to other banks this week. Banks borrowed nearly US$153bn from the Fed in recent days, smashing the previous record of US$112bn set during the crisis of 2008.

Banks also drew on nearly US$12bn of loans from the Fed's new emergency lending programme established at the start of the week with the aim of preventing more banks from collapsing.

The US$318bn the Fed has loaned in total to the financial system is about half what was extended during the global financial crisis, CNN reported.

"But it is still a big number," said JPMorgan's Michael Feroli in a note to investors Thursday, CNN reported.

"The glass half-empty view is that banks need a lot of money. The glass half-full take is that the system is working as intended."

The banking industry has also coughed up billions. JPMorgan Chase, Bank of America and Citigroup are among a group of 11 lenders providing the US$30bn cash infusion aimed at shoring up confidence in First Republic Bank.

HSBC has reportedly committed more than US$2bn to SVB's UK business, which it bought on Sunday for 1 pound, CNN reported.

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