• The failure of several US regional banks last week, followed by the collapse of Credit Suisse, have raised concerns about the risks of contagion to French banks.
  • Because the financial crisis of 2008 is still in everyone's memories.
  • But according to Norbert Gaillard, an economist and independent consultant, banks are not only stronger today than they were then, but the sector is also much better regulated. Explanations.

A bad memory that reminds us: in 2008, a banking and financial crisis born in the United States spread worldwide. The collapse of several US regional banks last week, including Silicon Valley Bank (SVB), has caused unrest in French financial markets. Especially since it was followed by the very bad times experienced by Credit Suisse, one of the largest European banks, which had the worst session in its history on the stock market on Wednesday (-24.24% at the close).

The Paris Stock Exchange also fell 3.58% on Wednesday. Victims of a domino effect, European banking stocks (including Société Générale, BNP Paribas, Crédit Agricole) collapsed by more than 10%. 20 Minutes takes stock of the fears of contagion on the French banking system and its defense capabilities today compared to 2008.

Could Credit Suisse go bankrupt?

"Credit Suisse's difficulties are not surprising, because its leaders have made risky choices for several years," says Norbert Gaillard, economist and independent consultant. This institution is one of thirty global banks considered too big to be allowed to sink. Hence the decision of the Swiss Central Bank to come to its rescue on Wednesday evening by making available up to 50 billion Swiss francs (50.8 billion euros) to strengthen its liquidity.

The markets were visibly reassured, as the bank's share rebounded by 32% at the opening on Thursday morning. It closed the session up 19.15%. "We have taken the problem at the root, this decision should be enough to get Credit Suisse out of business. Especially since its leaders are planning a complete reorganization of the company, "says Norbert Gaillard.

What links do French banks have with Credit Suisse?

"There are links due to operations in the financial markets, whereby each bank is both the creditor and debtor of the other. Hence a strong interdependence," says Norbert Gaillard. This explains why an institution like Credit Suisse cannot be left in difficulty for very long, at the risk of contagion. It is this same interdependence that had led many establishments into turmoil in 2008, with the subprime crisis as a detonator.

Is the state of health of French banks better than in 2008?

Their 2022 results were good. "And compared to 2008, their configuration has evolved. BNP, Crédit Agricole and Societe Generale have a less risky profile, because at the time, there was a lot of investment in real estate, which had weighed them down during the crisis. It weighs much less in the balance today, "says Norbert Gaillard.

Another reassuring point, according to the economist: "The rather good solvency of French households, due to the fact that banks open the floodgates of credit less than a few years ago. On the other hand, unemployment has fallen sharply in recent years, and this is expected to continue due to the retirement of the baby boom generation. »

What guarantees have been in place since 2008?

International regulation has been strengthened since the 2008 crisis. The Basel accords strengthened banks' capital requirements to ensure their solvency against any losses they might incur. Liquidity ratio rules have also been put in place. "Moreover, the ECB's supervision of banks is stricter than in 2008. The latter is much more on the alert than at the time, because it has more experience in crisis management.

States themselves are more familiar with crisis management and how to avoid contagion. They went through that of subprimes, as we said, but also that of Greek debt, Covid-19, "says Norbert Gaillard. Large-scale stress tests have also increased since 2008. These are exercises simulating extreme financial crises, making it possible to assess the resilience of banks.

Are the French sensitive to what is happening on the financial markets, and do they tend to withdraw their marbles in case of banking turmoil?

The fear of French banks is to find themselves in difficulty if their customers withdraw their funds in case of general panic. But according to Norbert Gaillard, "the French have confidence in the banking system, as shown in particular by the record collection in January of the Livret A, even though the international situation is complex".

The economist also highlights one of the French specificities: "A good part of the cash of the big banks is at the ECB. This is reassuring if it is necessary to mobilize liquidity quickly. There is no risk of rapid asset sales that would not be optimal."

What are the guaranteed amounts for a bank's customers?

In France, it is the Deposit and Resolution Guarantee Fund (FGDR) that guarantees sight deposits up to 100,000 euros per account (current accounts, other accounts and savings plans on passbook) in less than 7 working days. The FGDR also reimburses the passbooks guaranteed by the State: Livret A, livret d'épargne populaire, livret de développement durable et solidaire, again within a maximum period of 7 working days and within a limit of 100,000 euros per customer.

Is the rebound of European stock markets this Thursday reassuring?

European stock markets rebounded after their fall on Wednesday, a little reassured by the confidence of the European Central Bank on the health of the sector. Paris took 2.03% on Thursday. "This crisis should eventually pass," says Norbert Gaillard.

The ECB raised rates by 0.5 percentage points. Is this a good sign?

The European Central Bank did not let itself be frightened by the risk of a new banking crisis and decided on Thursday for a further rate hike of 0.5%, in order to fight inflation. The banking sector "is currently in a much stronger position than in 2008," Christine Lagarde justified to the press. "We are closely monitoring market tensions and remain ready to respond," she said. "It's a good decision, because it means that we have raised rates in line with the level of inflation, without taking into account what is happening on the markets," said Norbert Gaillard.

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