The top story this past week has been the collapse of Silicon Valley Bank and Signature Bank here in the U.S.—as well as the near collapse of Credit Suisse in Switzerland. Concerns over the stability of the banking industry are having a ripple effect on the ag markets.
“Banking concerns here in the US have turned into some major banking concerns in Europe,” according to Rick Hollister, Senior Merchant and Market Analyst with The Andersons.
It was reported that Credit Suisse was close to failing on Wednesday before a bailout by the Swiss Central Bank to keep it afloat.
“At this moment, it doesn’t feel like the banking collapse of 2008,” says Hollister. “Silicon Valley Bank and then Signature Bank were regional banks that were probably too heavily invested in some of these newer financing products. But when you see Credit Suisse, that’s a big deal in Europe and that’s a big deal for grain trading. There are companies that clear through that bank to trade to Europe and trade to the Middle East, so that’s a little bigger deal.”
Hollister says that the large banks like JPMorganChase, Bank of America and Citigroup, appear to be far more stable.
“We still think our top tier banks here in the U.S. seem to be a little bit immune,” says Hollister. “All of it has put the spotlight back on our banking policies, how these banks are leveraged, and what products are they leveraged into—so, it’s unpredictable what happens from here.”
Hollister says many commodity traders will be focused on the Federal Reserve’s next course of action.
“If you look back at the 2008 banking crisis, the Fed policy at the time to bring the us out of the banking crisis was to make cheap money available to anybody and everybody,” says Hollister. “The feds have been on the opposite approach here, so it’ll be really interesting to see how the smart folks in that arena think we should proceed here.”
The failures of Silicon Valley Bank and Signature Bank are the second and third largest bank failures in U.S. history.