Finance - March 15, 2023

Credit Suisse capital, liquidity adequate: central bank

Credit Suisse capital

Zurich (AFP) – The Swiss central bank said on Wednesday that capital and liquidity levels at embattled Credit Suisse were adequate but stressed it was ready to make liquidity available to the institution if needed.

The announcement came after shares in Switzerland’s second-biggest bank nosedived to historic lows on Wednesday after its main shareholder said it would not invest any more money, as market jitters over European lenders spiralled.

“Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks,” the Swiss National Bank (SNB) and Swiss financial regulator Finma said in a joint statement.

The SNB will provide liquidity to Credit Suisse “if necessary”, the statement added, after a turbulent day in which the bank’s market value fell below $7 billion.

Credit Suisse, hit by a series of scandals in recent years, saw its share price tumble off a cliff after Saudi National Bank chairman Ammar al-Khudairy said it would “absolutely not” up its stake.

Credit Suisse’s market value had already taken a heavy blow this week over fears of contagion from the collapse of two US banks and its annual report citing “material weaknesses” in internal controls.

The bank’s shares were quickly in freefall on the Swiss stock exchange, plunging more than 30 percent to a record low of 1.55 Swiss francs.

The bank regained some ground by the close, ending the day’s trading 24.24 percent down at 1.697 Swiss francs.

Fears about the bank were spreading beyond Switzerland’s borders, but US stock markets bounced after the Swiss central bank’s assurances.

The tech-rich Nasdaq gained 0.1 percent, while both the Dow and S&P 500 finished above session lows.

A US Treasury spokesperson said the finance ministry was “monitoring” the problems surrounding Credit Suisse and was “in touch with global counterparts”.

‘Too big to fail’

Amid the market panic, Credit Suisse chairman Axel Lehmann insisted at the Financial Sector Conference in Saudi Arabia that the bank did not need government assistance, saying it “isn’t a topic”.

“We have strong capital ratios, a strong balance sheet,” Lehmann said, adding: “We already took the medicine,” referring to the bank’s drastic restructuring plan revealed in October.

Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.

Credit Suisse share price
Credit Suisse share price © Jean-Michel CORNU / AFP

Citing three anonymous sources, the Financial Times newspaper had reported that Credit Suisse had appealed to Switzerland’s central bank and its financial regulator for “a show of support”.

Analysts warned of mounting concerns over the bank’s viability and the impact on the larger banking sector, as shares of other lenders sank on Wednesday after a rebound the day before.

“Where one big shareholder goes, others may follow. Credit Suisse now has to come with a concrete plan to stop outflows, and do it fast,” IG analyst Chris Beauchamp told AFP.

Neil Wilson, chief market analyst at trading firm Finalto, agreed.

“If Credit Suisse were to run into serious existential trouble, we are in a whole other world of pain. It really is too big to fail.”

Role of the regulators

The Saudi National Bank became Credit Suisse’s largest shareholder in a capital raising in November, launched to finance a major restructuring of the Zurich-based lender aimed at steadying the ship.

But Khudairy said the kingdom’s largest commercial bank would not be putting in any more money.

“Absolutely not, for many reasons outside the simplest reason which is regulatory and statutory,” he told Bloomberg TV.

“We now own 9.8 percent of the bank. If we go above 10 percent, all kind of new rules kick in… and we are not inclined to get into a new regulatory regime,” the chairman said.

In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but since then the bank has endured a barrage of problems that have eaten away its market value.

It was hit by the implosion of US fund Archegos, which cost it more than $5 billion.

Its asset management branch was rocked by the bankruptcy of British financial firm Greensill, in which some $10 billion had been committed through four funds.

The bank booked a net loss of 7.3 billion Swiss francs ($7.8 billion) for the 2022 financial year.

That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector — one of the activities on which the bank intends to refocus as part of a major restructuring plan.

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