Credit Suisse to get liquidity backstop if needed, SNB says
SWITZERLAND’S central bank and financial regulator said Credit Suisse Group will receive a liquidity backstop if needed, seeking to restore confidence in the troubled lender after a record slump in its shares.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks,” the Swiss National Bank (SNB) and Finma said in a joint statement late Wednesday (Mar 15). “If necessary, the SNB will provide Credit Suisse with liquidity.”
Shares in Credit Suisse slumped by as much as 31 per cent on Wednesday in Zurich trading, and its bonds fell to levels that signal deep financial distress, as persistent doubts over the scandal-ridden lender combined with a global selloff in banking stocks. The government, central bank and Finma have been discussing ways to stabilise the bank after a tumultuous day sparked by the firm’s largest investor ruling out increasing its stake, Bloomberg reported earlier.
The options discussed include a separation of the Swiss unit and a tie-up with larger rival UBS Group. The Swiss central bank offers funding to banks against collateral as a matter of course, while the government has been working on legislation that would make public funds available for banks being wound down. The joint statement didn’t specify terms of the SNB liquidity.
Credit Suisse’s American depositary receipts pared losses after the announcement by Swiss authorities. They fell 14 per cent to US$2.16 at the close in New York after sliding as much as 30 per cent.
“We welcome the statement of support,” Credit Suisse wrote on Twitter. That came after chairman Axel Lehmann said at a conference on Wednesday that government assistance “isn’t a topic”.
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On Wednesday, the Saudi National Bank ruled out increasing its stake because of regulatory constraints. The plunge helped drag all European lenders lower as investors fled from banking risk after turmoil induced by the collapse of Silicon Valley Bank.
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“There are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market,” Finma and the SNB said in the statement.
Chief executive officer Ulrich Koerner on Tuesday asked for patience and said the bank’s financial position is sound. He pointed to the firm’s liquidity coverage ratio, which indicates the bank can handle more than a month’s worth of outflows in a period of stress.
Switzerland’s second-largest lender, which traces its roots back to 1856, has been pummelled over the last several years by a series of blowups, scandals, leadership changes and legal issues. The company’s 7.3 billion franc (S$10.6 billion) loss last year wiped out the previous decade’s worth of profits, and the bank’s second strategy pivot in as many years has so far failed to win over investors or halt client outflows. BLOOMBERG
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