London (CNN) Switzerland’s central bank said on Wednesday it was ready to provide financial support to Credit Suisse after shares in the country’s second-biggest lender plunged as much as 30%.
In a joint statement with Swiss financial market regulator FINMA, the Swiss National Bank (SNB) said Credit Suisse (CS) met the “strict capital and liquidity requirements” imposed on banks that are important to the wider system of finances.
“If necessary, the SNB will provide CS with liquidity,” they said.
Already on edge after the failure of Silicon Valley Bank in the United States last week, investors dumped shares of the embattled Swiss bank earlier in the day, sending them tumbling to a new record low after its biggest backer indicated that no additional funding would be provided. .
In their statement, the Swiss authorities said that the problems of “some banks in the USA do not pose a direct risk of a crash in the Swiss financial markets.”
“There are no signs of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market,” the statement continued.
Saudi backers ‘not inclined’ to increase funding
The chairman of the Saudi National Bank – Credit Suisse’s largest shareholder, following a capital increase last fall – said early Wednesday that it would not increase its stake in Credit Suisse.
“The answer is absolutely no, for many reasons,” Ammar Al Khudairy told Bloomberg, on the sidelines of a conference in Saudi Arabia. “I will say the simplest reason, which is regulatory and statutory. We currently own 9.8% of the bank – if we go above 10% all kinds of new rules will kick in, even if it our regulator or the European regulator or the Swiss regulator,” he said. “We are not inclined to enter into a new regulatory regime.”
Once a big player on Wall Street, Credit Suisse has been hit by a series of missteps and compliance failures over the past few years that have tarnished its reputation with clients and investors, and cost several top executives in their jobs.
Customers withdrew 123 billion Swiss francs ($133 billion) from Credit Suisse last year — mostly in the fourth quarter — and the bank reported an annual loss of nearly 7.3 billion. Swiss franc ($7.9 billion), the largest since the global financial crisis in 2008.
Last October, the lender began a “radical” restructuring plan that included cutting 9,000 full-time jobs, spinning off its investment bank and focusing on wealth management.
Al Khudairy said he was happy with the change, adding that he did not think the Swiss lender needed more money. Others are not so sure.
Johann Scholtz, a European banking analyst at Morningstar, said Credit Suisse may not have enough capital to absorb losses by 2023 as its funding costs become prohibitive.
“In order to prevent client outflows and ease the anxiety of wholesale fund providers, we believe that Credit Suisse needs one more right. [share] issue,” he commented Wednesday. “We believe that the alternative is a break-up … with healthy businesses – the Swiss bank, asset management and wealth management and possibly some part of the investment banking business – which is sold or separately. listed.”
‘It’s not just a problem in Switzerland’
The bank’s shares ultimately fell 24% in Zurich on Wednesday, and the cost of buying insurance against the risk of a Credit Suisse default hit a new record high, according to S&P Global Market Intelligence.
Credit Suisse declined to comment.
The crash spilled over into the rest of European banking, with French and German banks such as BNP Paribas, Societe Generale, Commerzbank and Deutsche Bank falling between 8% and 12%. Banks in Italy and the UK also collapsed.
Two supervisory sources told Reuters that the ECB had contacted the banks to question them about their exposures to Credit Suisse. The ECB declined to comment.
While Credit Suisse’s problems are widely known, with assets of about 530 billion Swiss francs ($573 billion) it presents an even bigger potential headache.
“[Credit Suisse] because it is more globally interconnected, with multiple subsidiaries outside Switzerland including in the US,” wrote Andrew Kenningham, chief Europe economist at Capital Economics. “Credit Suisse is not just a Swiss problem but a global one.”
The blows keep coming for Switzerland’s second-largest bank. On Tuesday, it acknowledged “material weakness” in its financial reporting and scrapped bonuses for top executives.
Credit Suisse said in its annual report that it found that “the group’s internal control over financial reporting was ineffective” because it failed to adequately identify potential risks to financial statements.
The bank urgently developed a “remediation plan” to strengthen its controls.
Speaking on Bloomberg TV on Tuesday, Credit Suisse CEO Ulrich Körner said the bank saw “materially good cash flows” on Monday, even as markets feared the collapse of SVB and Signature Bank in the United States. United States.
Overall, outflows from the bank were “significantly moderated” after customers withdrew 111 billion francs ($122 billion) in the three months to December, Körner added. In its annual report, the bank said outflows had not been reversed by the end of last year.
– Olesya Dmitracova and Livvy Doherty contributed to this article.
