The central bank and the policeman of the Swiss financial markets finally gave verbal support to Credit Suisse on Wednesday evening, at the end of a nightmarish day for the second largest bank in the country, which collapsed on the stock market.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will make liquidity available to Credit Suisse,” said the SNB and Finma in a joint press release issued at the start of the evening, after a day of astonishing silence.
At the close, the title showed -24.24% and the bank was only worth a little less than 6.7 billion Swiss francs (6.8 billion euros) on the stock market. A straw for one of the 30 banks in the world considered too big to fail.
Earlier in the day, the two most senior executives of Credit Suisse had already tried to reassure on the financial solidity of the banking giant but without succeeding in convincing the investors who inflicted on the action of the bank the worst fall in its history.
Perceived as the weak link in Switzerland, the establishment saw its share price drop by up to 30% to reach a new historic low at 1.55 Swiss francs despite the intervention of its president, Axel Lehmann and his director. General Ulrich Körner to try to straighten the bar.
No “risk of contagion”?
For the SNB and Finma, “the current turbulence on the American banking market does not suggest that there is a risk of direct contagion for Swiss establishments”. In an interview with the Channel News Asia television channel, retweeted by the bank, Ulrich Körner, multiplied the reassuring words: “We are a solid bank, we are a bank of global dimension under Swiss regulation”. “We meet and exceed virtually all regulatory requirements,” he added, adding, “our capital, our liquidity base is very, very strong.”
The concern goes beyond the borders of the Alpine country and the US Treasury said “monitor the situation and be in contact with its international counterparts”. In France, Prime Minister Elisabeth Borne publicly called on the Swiss authorities to fix the bank’s problems and asked her finance minister to speak to her counterpart in Bern.
This vertiginous fall began after statements by the president of the Saudi National Bank, the largest shareholder of Credit Suisse. The Saudis came to the rescue of the bank by entering its capital in November. But the Saudi National Bank has “absolutely no” plans to inject more money, mainly for regulatory reasons, said Ammar al-Khudairy, its chairman.
The Saudi National Bank holds a 9.8% stake. But under Swiss law, the market policeman, Finma, should decide if it crossed the 10% threshold. In an interview with Reuters, al-Khudairy said he was “very happy” with Credit Suisse’s restructuring program, referring to a “very solid” bank.
Founded in 1856, Credit Suisse is a pillar of the Swiss financial center but it has been in turmoil since the bankruptcy of the British financial company Greensill, which marked the start of a series of scandals that weakened the bank. Since March 2021, the stock has lost more than 83% of its value. “The pressure on Credit Suisse has hit an already nervous market,” Rabobank analyst Jane Foley told AFP.
A “completely different world”
Investors are worried about the risk of contagion after the bankruptcy of the American bank SVB. “There seem to be growing investor concerns,” Finalto analyst Neil Wilson said in a market commentary. But if Credit Suisse were to face “existential problems”, then “we would be faced with something of a completely different dimension. It is really too important to let go,” he insisted.
Unlike SVB, Credit Suisse is one of 30 banks worldwide considered too big to fail, which imposes stricter regulations on it to be able to withstand the shock in the event of difficulty. Credit Suisse launched a major restructuring program in October in an attempt to recover. But some shareholders ended up throwing in the towel, like the American investment company Harris Associates, long its largest shareholder, which revealed last week that it had completely sold its stake in the bank.
At the beginning of February, Credit Suisse had announced a net loss of 7.3 billion Swiss francs (nearly 7.4 billion euros) for the financial year 2022 against the backdrop of massive withdrawals of funds from its customers and had warned still expect a “substantial” pre-tax loss in 2023.