By Chrysostomos Tsoufis

Despite calls from some analysts and market players, the ECB remained true to its….Unyielding stance against inflation by deciding on a 6th rate hike from September 2022. According to Reuters, the…they considered deviating from the path they have followed until now, but the “lifebuoy” of 50 billion Swiss francs that the Central Bank of Switzerland threw at Credit Suisse, dispelled any thoughts.

Someone reading her decision Frankfurt immediately notices 2 things.

First, the ECB still sees the biggest threat right now to the Eurozone economy as persistent inflation. Its announcement typically states that inflation is predicted to remain very high for a long time. And since its mission is to keep it at 2%, it was decided that the fight is now in favor of everyone.

The second conclusion is that in Frankfurt the fears of the markets about the stability of the European banking system are not shared to the same extent due to the… crisis of Credit Suisse. A crisis that according to many analysts is largely the result of the practice of the bank’s managers themselves.

Christine Lagarde herself mentioned that she was present at both the events of 2008 and LehmanBrothers precisely to demonstrate that the two time periods are very far from each other. And if something happens, said Ms. Lagarde, we now have the tools to deal with it.

But this does not mean that there are no reasons for concern. That – in contrast to its previous meetings – the ECB gave no indication of how it will proceed in the future regarding interest rate hikes is absolutely indicative of the fluidity of the situation.

For many months now, many analysts have been warning that this aggressive increase in interest rates on both sides of the Atlantic – which means a violent reduction in liquidity – apart from pushing America and Europe towards recession, also exposes the… weak links of the system . And if the Silicon Valley Bank or Signature Bank that went bust were small banks and manageable cases and didn’t have any particular exposure to Europe, not the same with Credit Suisse.

Switzerland’s second largest bank, together with 30 others, is characterized as a “globally important systemic bank” with important links and exposure mainly in Asia and the USA. It is no coincidence that in the USA they are already measuring the exposure that the big American banks have to the Swiss patient, while the ECB has addressed the same question to the financial institutions under its supervision.

Managers of this bank – who change like shirts – and its executives have “managed” to get involved in cases of money laundering, violation of Covid regulations, fraud and even espionage. It is no coincidence that only in the last quarter of last year the bank had an outflow of deposits of around €110 million. For the first time in its nearly 170-year history, its stock fell below 2 Swiss francs.

So it is reasonable to raise issues of supervision – although we are supposed to have learned from the suffering of 2008. If one of the world’s 31 largest banks is in such a mess, one might reasonably wonder what is happening to the rest. And this is how the virus of fear often spreads, this is also how bankruns happen, even if the facts do not support them. The spark of a thought or a suspicion is enough.

In the last few hours, the takeover scenarios of Credit Suisse are also increasing, possibly also by its major competitor, the largest Swiss bank UBS. And the 1 million… Swiss franc question on everyone’s mind is whether Credit Suisse is a sui generis and isolated event, or whether it is the first piece of a domino of developments in the global banking system that no one knows where it will lead to…