The central bank and the country’s financial regulator said on Wednesday that the Swiss national bank would step in to help Credit Suisse if it becomes necessary to do so.
The show of support comes after the country’s second largest lender sent shares worldwide on a downward spiral and raised contagion fears for the banking sector.
Credit Suisse’s troubles began the day its top shareholder said in a Bloomberg interview that he would not invest additional funds in the Swiss bank. Ammar Al Khudairi, president of the Saudi National Bank, told media outlets that taking a stake of more than 10% in Credit Suisse would create regulatory complications.
That pushed Credit Suisse shares to a new low on Wednesday. The stock (ticker: CSGN.Switzerland) closed down 24% in Zurich and its American Depository Receipts (CS) were down 25% in US trade.
Switzerland’s regulator, FINMA, said in a statement that it has been in contact with Credit Suisse and confirmed that the bank “meets the high capital and liquidity requirements for systemically important banks.” The statement also said that the Swiss National Bank “will provide liquidity to globally active banks if necessary.”
The statement also said, “There are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market.”
According to a Bloomberg report, the US Treasury Department is actively reviewing Credit Suisse’s US financial sector exposure. The Treasury Department did not respond to a request for comment.
After the collapse of Silicon Valley Bank, the banking sector is on high alert. European banks such as France’s Societe Generale (GLE.FRANCE) and Italy’s Unicredit (UCG.ITALY) were down double digits on Wednesday. UBS Group (UBSG.Switzerland) fell nearly 8.7%.
Shares of US lenders Citigroup (C), JP Morgan Chase (JPM) and Wells Fargo (WFC) also fell on Wednesday.
Shares of regional banks, placed on watch for downgrade by rating firm Moody’s on Tuesday, were mixed. Shares of Western Alliance Bancorp (WAL) and Comerica (CMA) were earlier down but later turned higher. Shares of First Republic Bank (FRC) declined by 17%.
Renewed fears of contagion also weighed on the broader market. The S&P 500 was off 2% and the Dow Jones Industrial Average was down more than 700 points, or 2.2%. At one point, the S&P 500 fell into negative territory for the year. The pan-European STOXX Europe 600 index was down nearly 3% with all 45 components in the red.
“The banking route has taken another ominous turn,” said Susannah Streeter, head of money markets at Hargreaves Lansdowne. “The concern is that if there is a rapid outflow of deposits, banks may not have enough buffers sitting on large unrealized losses in their bond portfolios.”
Investors are eyeing upcoming policy decisions from central banks, which have – in some cases – raised interest rates aggressively over the past year. The European Central Bank, set to meet on Thursday, will be the first central bank to meet since the SVB meltdown. The Federal Reserve meets on March 22.
European Central Bank President Christine Lagarde said a month ago that the ECB wanted to raise rates by another half a point in March. The odds that the Fed will not raise rates at its March meeting rose to nearly 60% on Wednesday, according to CME Fedwatch.
Why is Credit Suisse struggling? A recap of recent troubles.
Credit Suisse’s struggle goes beyond today’s news.
The stock fell on Tuesday after the release of a delayed annual report describing weaknesses in the firm’s financial controls. The report was delayed after the Securities and Exchange Commission raised questions about its cash flow statements in 2019 and 2020.
Last week, asset manager Harris Associates, Credit Suisse’s largest shareholder, completely exited its position in the bank, according to a report in the Financial Times. Credit Suisse declined to comment on the report.
This is the latest in a series of issues for the bank. The 170-year-old Swiss bank was hit hard by the 2021 collapse of Arcagos Capital and Greensoil Capital. A series of scandals, executive changes and client withdrawals.
In November, Credit Suisse announced plans to spin out its investment bank under its revived First Boston brand. It also dropped 9,000 jobs.
Credit Suisse is now focusing on rebuilding its wealth management business. That unit experienced outflows of approximately $100 billion in the fourth quarter. In addition to the Saudi National Bank, Credit Suisse’s largest shareholders include Qatar Holding, Olayan Group and BlackRock.,
The bank’s shares have declined by 75% in the last one year.
Write to Karishma Vanjani at [email protected], Brian Swint at [email protected] and Adam Clark at [email protected]
Credit: www.marketwatch.com /