Switzerland Central Bank says ready to support Credit Suisse
Switzerland Central Bank says ready to support Credit Suisse

Switzerland Central Bank says ready to support Credit Suisse

Banking 15 March, 2023 2:22 PM

The Swiss National Bank said on Wednesday it was ready to provide financial support to Credit Suisse after shares of the country's second-largest lender plunged 30%.

The Swiss National Bank (SNB) said in a joint statement with Swiss financial market regulator FINMA that Credit Suisse (CS) complies with "strict capital and liquidity requirements" applicable to significant banks for the broader financial system. “.

“The SNB will provide liquidity to CITIC if necessary,” they said.

Investors, already nervous after the collapse of Silicon Valley Bank last week, sold shares of the troubled Swiss lender earlier in the day, with shares falling to an all-time low for any additional funding.

In a statement, Swiss authorities said that "the problems with certain banks in the United States do not present an immediate risk of contagion to the Swiss financial markets.

"There is no indication that Swiss institutions are at risk of direct contagion due to the current turmoil in the US banking market," the statement continued.

Saudi supporters 'don't want' to raise funds, there are several reasons," Ammar Al Khudairy told Bloomberg on the sidelines of a conference in Saudi Arabia. "I would cite the simplest reason, which is regulatory and statutory. We now have 9.

8% of banks - if we go over 10%, all sorts of new rules come into effect, whether it's through our regulators, European regulators or Swiss regulators," he said. "We don't tend to to enter into new regulatory regimes .

Credit Suisse, once a major player on Wall Street, has been hit in recent years with a series of missteps and compliance lapses that have damaged its reputation with clients and investors and cost many their money. leaders.

Customers withdrew 123 billion Swiss francs. ($133 billion) from Credit Suisse last year – mostly in the fourth quarter – as the bank posted an annual net loss of nearly 7.3 billion Swiss francs ($700 million).

$9 billion), the highest since the global financial crisis of 2008.

In October, the bank embarked on an "aggressive" restructuring plan that included cutting 9000 full-time of its investment banking and concentration on wealth management.

Al Khudairy said he was happy with the restructuring, adding that he did not believe the Swiss bank needed additional funds. Others are less certain.

Morningstar European banking analyst Johann Scholtz said Credit Suisse may no longer have enough capital to absorb losses in 2023 as its funding costs become prohibitive.

"To stem the exodus of customers and allay the concerns of wholesale financial service providers, we believe Credit Suisse needs another real [equity] issue," he said on Wednesday. "We believe the other option is to separate... the sound businesses - Swiss Banking, Asset Management and Wealth Management, and possibly parts of Investment Banking - are being sold or listed separately." a Swiss problem'

The bank's shares fell 24% in Zurich on Wednesday, according to S&P Global Market Intelligence, as the cost of buying Credit Suisse default risk insurance hit an all-time high.

Credit Suisse declined to comment.

The crash spread to other European banking stocks, with shares of French and German banks, including BNP Paribas, Societe Generale, Commerzbank and Deutsche Bank, falling between 8% and 12%.

Shares of banks in Italy and Britain also fell.

The ECB has contacted banks to inquire about their exposure to Credit Suisse, two regulatory sources told Reuters. The ECB declined to comment.

While Credit Suisse's problems are well known, with assets of around 530 billion Swiss francs ($573 billion), the underlying problems it poses are far greater.

"[Credit Suisse] is much more globally connected, with multiple subsidiaries outside of Switzerland, including in the United States," said Andrew Kenningham, chief economist for Europe at Capital. Economics. ) wrote.

"Credit Suisse is not just a Swiss problem, it's a global problem."

Switzerland's second largest bank continues to be affected. On Tuesday, he admitted "significant flaws" in his financial reports and canceled bonuses for senior executives.

Credit Suisse said in its annual report that it found "the group's internal control over financial reporting to be ineffective" because it failed to properly identify potential risks to the financial statements.

The bank is urgently drawing up a "recovery plan" to strengthen its controls.

Credit Suisse chief executive Ulrich Körner said in a Bloomberg TV interview on Tuesday that the bank saw "a lot of good inflows" on Monday, even as markets were rocked by the collapse of SVB and Signature Bank in the United States. UNITED STATES.

Overall, banks saw a "significant reduction" in outflows after customers withdrew 111 billion francs ($122 billion) in the three months to December, Körner added. The bank said in its annual report that the outflows had not reversed at the end of last year.