swiss bank credit suisse It said on 16 March it would move to shore up its finances by borrowing up to $54 billion from the central bank after its shares fell, with bank failures in the United States pulling down other major European lenders.
Credit Suisse said it would exercise an option to borrow up to 50 billion francs ($53.7 billion) from the central bank.
“This additional liquidity will support Credit Suisse’s core businesses and customers as Credit Suisse takes the necessary steps to create a bank that is simpler and more focused on customer needs,” the bank said.
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fueling new fears about the health of financial institutions following the recent collapse of Silicon Valley Bank And signature bank In the US, at one point, Credit Suisse shares lost more than a quarter of their value on 15 March.
The bank’s largest shareholder – the Saudi National Bank – told news outlets that as the share price hit a record low, it would not pump more money into the Swiss lender, which was beset by problems long before US banks collapsed. The Saudi bank trying to avoid rules that kick in with a stake above 10 percent has invested about 1.5 billion Swiss francs to acquire holdings below that limit.
The turmoil triggered an automatic halt in trading of Credit Suisse shares on the Swiss market and caused shares of other European banks to drop double digits.
Speaking at a financial conference in the Saudi capital Riyadh on March 15, Credit Suisse chairman Axel Lehman defended the bank, saying “we’ve already taken the medicine” to reduce risk.
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Asked whether he would rule out government aid in the future, he said: “It is not an issue. … We are regulated. We have strong capital ratios, very strong balance sheet. We’re all on deck, so it’s not an issue.
Switzerland’s central bank announced late on March 15 that it was prepared to act, adding that it would support Credit Suisse if necessary. A statement from the bank did not specify whether the support would come in the form of cash or loans or other assistance. The regulators said they believe the bank has sufficient funds to meet its obligations.
A day earlier, Credit Suisse reported that managers had identified “material weaknesses” in the bank’s internal controls over financial reporting as of the end of last year. This raised new doubts about the bank’s ability to weather the storm.
Credit Suisse stock plunged nearly 30% to around 1.6 Swiss francs ($1.73), before a 24% loss at 1.70 francs ($1.83) at the end of trading on the SIX stock exchange. Its lowest price was down more than 85% since February 2021.
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Shares also made some ground on Wall Street, following a joint announcement from the Swiss National Bank and the Swiss financial markets regulator.
The stock has suffered a long, sustained decline: in 2007, the bank’s shares traded at over 80 francs ($86.71) each.
With concerns about the potential for more lurking trouble in the banking system, investors were quick to sell off bank shares.
France’s Societe Generale SA dropped 12% at one point. France’s BNP Paribas fell more than 10%. Germany’s Deutsche Bank was down 8% and Britain’s Barclays Bank was down nearly 8%. Trading at two French banks was briefly suspended.
The STOXX Banks index of 21 major European lenders declined 8.4% after markets were relatively calm on March 14.
Shares in US markets were mixed on March 15, with the Nasdaq Composite ending 0.1% higher while the S&P 500 dropped 0.7%. The Dow Jones Industrial Average closed down 0.9% after posting huge losses at the start of the session.
Japanese banks resumed their downtrend, with Resona Holdings, the country’s No. 5 bank, falling 5% while other major banks fell more than 3%.
The unrest came a day before a meeting of the European Central Bank. President Christine Lagarde said last week, ahead of the US failures, that the bank would raise interest rates by half a percentage point to fight against inflation. Markets were watching closely to see whether the bank moves forward despite the latest turmoil.
Andrew Cunningham, chief Europe economist at Capital Economics, said Credit Suisse was “a much bigger concern for the global economy”, comparing it to the collapse of US banks.
It has several subsidiaries outside Switzerland and conducts trading for hedge funds.
“Credit Suisse is not only a Swiss problem but a global problem,” he said.
He added, however, that the bank’s “problems were well known so have not come as a complete shock to investors or policymakers”.
The troubles “raise the question once again whether this is the start of a global crisis or just another silly ‘case'”, Mr Cunningham said in a note. “Credit Suisse was widely seen as the weakest link among Europe’s big banks, but it is not the only bank that has struggled with weak profitability in recent years.”
Leaving a Credit Suisse branch in Geneva, Fadi Rachid said he and his wife are concerned about the health of the bank. He planned to transfer some money to UBS.
“I find it hard to believe that Credit Suisse is going to be able to get rid of these problems,” said Rachid, a 56-year-old doctor.
Investors responded to “a wider structural problem” in banking after a long period of low interest rates and “very, very loose monetary policy”, said Sasha Steffen, professor of finance at the Frankfurt School of Finance and Management.
To earn some return, banks “needed to take on more risk, and some banks did it more judiciously than others”.
European finance ministers said this week that their banking systems have no direct link to US bank failures.
Europe strengthened its banking safeguards after the global financial crisis, which shifted supervision of the biggest banks to the central bank following the collapse of US investment bank Lehman Brothers in 2008, analysts said.
Credit Suisse parent bank is not part of EU supervision, but it has entities in several European countries. Credit Suisse is subject to international regulations that require it to maintain financial buffers against losses as one of 30 so-called globally systemically important banks, or G-SIBs.
The Swiss bank has been pushing for a new strategy to raise money from investors and overcome a string of troubles including bad bets on hedge funds, repeated shake-ups of its top management and an espionage scandal involving Zurich rival UBS. Used to be.
In an annual report released March 14, Credit Suisse said customer deposits at the end of last year fell 41%, or 159.6 billion francs ($172.1 billion), compared with a year earlier.