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Banking crisis in the United States: European banks are sinking in the stock market for fear of contagion

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The big European banks suffer on the stock market this Monday with drops greater than 10% in some cases, and drag down the main European indexes due to the unpredictable consequences for the industry that can lead to the bankruptcy of Americans Silicon Valley bank and signature bank.

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On a day with no major macroeconomic data, fear of contagion across the banking sector has captured investors’ attention, even though analysts believe there is little chance of that happening.

“We understand that (in Europe) the risks of contagion are more limited as long as we are talking about more diversified entities, not concentrated in a single sector such as the technological one-,” investment manager Renta4 said in a market report on Monday.

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Germany's Commerzbank fell 10.2% on Monday.  Photo: Daniel Roland/AFP

Germany’s Commerzbank fell 10.2% on Monday. Photo: Daniel Roland/AFP

Singular Bank adds that “the timely and (…) successful joint intervention” of the Federal Reserve (Fed), the Treasury and the FDIC (Federal Deposit Insurance Corporation) to guarantee deposits “It should serve to reassure investors.”

However, the financial sector has been sinking in the stock market since markets opened and during Monday morning the declines had increased in Europe.

The greatest decreases were for the French Crédit Agricole, of 14.34%; the German Commerzbank, 10.2%, in addition to the Spanish Banco Santander, 8.27%, with a significant presence in Latin America.

In Italy UniCredit loses 7.84%; and Intesa Sanpaolo, 6.83

The Spanish Banco Santander, with an important presence in Latin America, lost 8.27%.  Photo: Gabrie Bouys/AFP

The Spanish Banco Santander, with an important presence in Latin America, lost 8.27%. Photo: Gabrie Bouys/AFP

French BNP Paribas dropped 6.39%; ING (Netherlands), 6.98%; and BBVA (Spain), 7.04%. In the UK, Barclays lost 5.36%; and HSBC, 4.7%.

The main registered European stock indexes biggest declines so far this yeara period which up to now has been characterized by a great stock market appreciation.

Milan fell by 4.09%; Madrid, 3.29%; Frankfurt, 18.3

The trigger for the intervention of the SVB was lack of liquidity, which forced him to do it sell part of its debt securities portfolio with losses. This, in turn, prompted him to announce a failed capital increase to improve his accounts whereby found no funds.

On the weekend, it closed Signature Bank to prevent panic from spreading to other subjects and to the system as a whole.

EFE extension

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Source: Clarin

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