By Stefania Spezzati and Elisa Martinuzzi
LONDON, March 19 (Reuters) – At least two major European banks are looking at contagion scenarios that could spread through the region’s banking sector and expect the Federal Reserve and ECB to step in with stronger signals of support. strong, two senior executives with knowledge of the deliberations told Reuters.
The fallout from the confidence crisis in Credit Suisse Group AG and the failure of two U.S. banks could continue to reverberate through the financial system next week, the two executives told Reuters on Sunday.
The two banks held their own internal deliberations on how soon the European Central Bank should step in to highlight banks’ resilience, particularly their capital and liquidity positions, the sources said.
A key focus of these internal discussions is whether such statements could backfire and stoke even more panic if made too soon, the people said.
Executives said their banks and the sector are well capitalized and liquidity is strong, but they fear the crisis in confidence could wash away more lenders.
One of the executives said the Federal Reserve may have to act first, as the failures of Silicon Valley Bank and Signature Bank in the United States have raised concerns in Europe.
The ECB declined to comment. A Fed spokesman had no immediate comment.
The ECB stuck to plans to hike rates by half a point on Thursday to contain inflation. But he stressed that he was monitoring market tensions and would react if necessary to preserve price stability and financial stability in the currency bloc.
As one of the world’s 30 systemically important banks, Credit Suisse’s problems could ripple throughout the financial system, industry executives said.
As regulators want a resolution to Credit Suisse’s crisis of confidence before markets reopen on Monday, a source has warned talks with UBS Group AG face significant hurdles and 10,000 jobs may have to be cut if the two banks were merging, Reuters reported.
(Additional reporting by Balazs Koranyi and Dan Burns. Writing by Dhara Ranasinghe; Editing by Paritosh Bansal)