Across Europe, the trading week starts in the red: the German Frankfurt index Dax is down 3.09 percent. The London stock exchange FTSE 100 is down 2.43 percent. In Oslo, the main index is down 2.21 per cent. The decline comes after a dramatic weekend in the United States. The nation’s 16th largest bank, Silicon Valley Bank, ran out of money in a rush last week. BLUE MONDAY: No one has an overview of the consequences of the bank collapse in the US, and nervous investors send the German Dax index straight down, among other things. Photo: STAFF / Reuters American authorities had to intervene The problems started on Wednesday when the bank asked the investors to spit in NOK 18 billion. Then the customers became worried about whether it is safe to have their money in the bank, and large amounts were withdrawn and transferred to other banks. Then the bank had too little money available. The bank had to sell assets which are largely bonds with a fixed interest rate. These have fallen a lot in value over the past year because the US central bank has raised the key interest rate. On Friday, March 10, the US authorities closed the bank because there was not enough money to do banking anymore. – There are certainly many banks in the world that are in the same situation, that if they had had to sell all their assets, they would in practice have been insolvent and placed under administration, says head of analysis Thomas Eitzen for credit at SEB. May result in a lower interest rate peak in Norway The uncertainty is so serious that the market believes the US central bank must slow down interest rate jumps going forward. Just a week ago, several people predicted that the US central bank would have to raise interest rates by 0.5 percent in March. – Interest rate expectations in the US have come down significantly, and it is now uncertain whether there will even be an interest rate hike from the US next week, says currency strategist Magne Østnor at DNB. Policy rate in percent The policy rate is set eight times a year by Norges Bank. The policy interest rate governs the interest rates in the banks, and affects your housing costs. The aim of raising the interest rate is for the high prices to come down again. The forecast tells us how Norges Bank thinks interest rates will develop in the future. Read more about sources and reservations here. A higher policy rate means increased expenses if you have a mortgage. A smaller rise in interest rates in the US could also result in a lower interest rate peak in Norway. – Interest rates are still expected to rise from Norges Bank. But it has gone from a situation where the market priced in interest of 3.75 per cent in the third quarter to 3.25 per cent. This is solely due to the conditions in the financial market now, says chief economist Marius Gonsholt Hov at Handelsbanken to news. The turmoil in the financial markets may make it more difficult to raise the policy rate further in the US, economists believe. The interest rate in the world’s largest economy is also indicative of the Norwegian key interest rate. Photo: Even Bjøringsøy Johnsen / news Crisis measures At the weekend, concerns grew that the bank collapse could spill over to several banks with a lot of assets in securities that have fallen in value. The New York bank Signature Bank was also closed. – They have had an exposure that has made them extremely sensitive to rising interest rates. If they have to sell off securities to cover the liabilities, the value plummets. They have unsecured values, and the market is looking for the same from other banks, says chief economist Marius Gonsholt Hov at Handelsbanken. Chief economist Marius Gonsholt Hov at Handelsbanken. Photo: Handelsbanken The US central bank held crisis meetings with US Treasury Secretary Janet Yellen on Sunday. They didn’t want to bail out Silicon Valley Bank, but made safeguards available to avoid a shutdown in the financial system. Eitzen tells news that the US authorities in practice had to guarantee the deposits in Silicon Valley Bank, to prevent a contagion effect to other banks. – What happened was necessary, but the consequences are now that all deposits in the US are now practically guaranteed by the US state. It’s a lot of money, and a potentially scary thing in the long run, says Eitzen. The market is nervous in case more problems emerge as a result of the banking collapse. – We will see if the measures are enough to dampen the financial unrest, or if this will spread further. It is unclear on a day like this, says Hov. No fear of contagion to Norwegian banks There is no reason to fear that this will contagion to Norway, the analyst believes, and it is unproblematic for Norwegian banks to obtain financing. – European banks are much more strictly regulated than American banks. A small Norwegian rural bank is more strictly regulated than one of the largest American banks, says Eitzen. He points out that even though Norwegian savings banks may also have a lot of bonds on their balance sheets, the banks are very liquid. In addition, the values of the bonds are adjusted to market value every single day. And in contrast to the situation for Silicon Valley Bank, the Norwegian savings banks almost exclusively have bonds with floating interest rates. This means that the value of the securities does not fall suddenly when the key interest rate rises. In an e-mail, Norges Bank writes that they “as always closely monitor developments in the markets and the economy”.
ttn-69
Bank collapse in the US causes a sharp fall in the stock market – news Norway – Overview of news from various parts of the country
