05 April 2023

SSM: Helsingin Sanomat Interview with Anneli Tuominen, Member of the Supervisory Board of the ECB,

Social media posts may also lead to rumours spreading even more quickly. Some posts are not based on facts, some could qualify as manipulation and some may, in the worst case, even be part of hybrid influencing activities.

What should we think about the recent turmoil in the banking markets?

The problems we have recently seen have largely been specific situations that I would definitely not extrapolate to the banking market as a whole. The situation of Silicon Valley Bank in the United States and the problems at Credit Suisse were specific to the individual banks. Yet they also create some uneasiness about healthy banks. Moreover, the economic situation is surrounded by high uncertainty owing to high inflation, rapid increases in interest rates, high energy prices, a weak growth outlook and Russia’s ongoing invasion of Ukraine. These elements already provide fertile ground for rumours to spread.

In this crisis it was once again surprising how easily bank share prices were derailed everywhere although, as you said, the situation of Silicon Valley Bank, for instance, was unique. Does it still surprise you how easily this sector can be pulled into a kind of psychological vicious circle?

The current situation also has an impact here, together with the fact that there are several sources of uncertainty at the moment. In such circumstances, even the smallest ripples through the market are watched closely.

Social media posts may also lead to rumours spreading even more quickly. Some posts are not based on facts, some could qualify as manipulation and some may, in the worst case, even be part of hybrid influencing activities. Hybrid influencing is, by definition, difficult to trace, but there is no evidence that it has been used in the context of bank crises. That being said, we should all be aware that there may be attempts to influence decision-making and public opinion through dishonest practices.

I would also like to mention the recent events in the crypto markets. They have sparked fears that the problems could spread to the financial sector. Enhanced regulation and supervision of crypto markets is therefore needed – and will be introduced. Banks currently have only limited exposures and links to crypto-assets, but this needs to be monitored. Personally, I am very critical of crypto-assets. They do not necessarily add value for society, and in the worst cases they have been used for criminal activities.

The problems at Silicon Valley Bank have been linked to the fact that the regulation of medium-sized banks has been weakened in the United States. Should the United States return to tighter regulation for medium-sized banks?

Absolutely, in the United States the same supervision that is applied to larger banks should be extended to smaller banks too – although, with a balance sheet of USD 200 billion, Silicon Valley Bank was not particularly small. At present, not all of the changes made to the Basel framework have been applied to medium-sized banks there. And these banks have not been subject to stress tests as frequently as large banks.

Are there similar time bombs in the valuation of bond exposures in the euro area in some areas outside liquidity buffers?

Based on our assessment, the overall picture of the banking sector is not a cause for concern. Supervisors scrutinise each bank’s balance sheet, and this scrutiny has not led to any concerns in this respect.

SSM

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