Market crisis scorecard: Lessons learned from a manic March

As calm returns to markets roiled by banking havoc in March, it’s time to reflect on the policy response.

The Federal Reserve and the European Central Bank continued hiking rates in March as Silicon Valley Bank failed and Credit Suisse was forced to merge with UBS. A measure of volatility in the Treasury market has eased after hitting its highest level since 2008 in March. “And then days later Credit Suisse was gone,” said Gael Combes, head of fundamental research at Swiss fund manager Unigestion.Aggressive tightening may still create another financial crisis, said Dartmouth economics professor and former Bank of England rate setter David Blanchflower.

Former ECB chief economist Peter Praet said the success of CS’s rescue was shown by turmoil not spreading to other banks and creditors bearing the cost to a large extent, which was “very rare” for a systemic institution. “It comforts the market,” said Mahmoud Pradhan, global head of macro at Amundi Institute and former deputy director of the IMF’s European department. “Often the amount of the facility extended is not needed, but it’s a safety measure,” he said.In the U.S. the Fed, the Treasury and the Federal Deposit Insurance Corporation took the rare decision to give SVB’s customers access to all non-insured deposits.

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