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Credit Suisse collapsed on the stock market on Wednesday, hit by concerns in the banking sector linked to the bankruptcy of the American bank SVB and after its main shareholder ruled out saving it in the event of difficulties. Investors, however, sent the Swiss bank’s share price skyrocketing on Thursday after the central bank’s more than $50 billion lifeline to the banking giant.
Credit Suisse announced on Thursday March 16 a short-term loan of up to 50 billion Swiss francs (50.7 billion euros) from the Swiss central bank, the day after a nightmarish day for the country’s second largest bank, which collapsed on the stock market. Something to reassure investors who have caused the Swiss bank’s share price to rise sharply.
Thursday, at the opening of the session, the title Credit Suisse jumped more than 30% in a strong volume of exchanges. The day before, the action had suffered the worst session in its history after a movement of panic following the statements of its largest shareholder, the Saudi National Bank. The stock had hit a historic low of CHF 1.55.
To stop the panic movement, Credit Suisse – which is part of the very small club of banks which are considered to play such an important role that they cannot be allowed to go bankrupt – announced in the middle of the night in Europe that it was going to appeal to the central bank to borrow up to 50 billion Swiss francs (50.7 billion euros) in order to “preventively strengthen” its liquidity.
The bank will also carry out a series of debt buyback operations for around 3 billion Swiss francs.
black day
Earlier Wednesday evening and after a day of astonishing silence, the Swiss Central Bank and the watchdog of the Swiss financial markets (Finma) assured that the bank’s finances were solid and met the strict criteria of banking regulations. . The central bank then said it was ready to let Credit Suisse access liquidity “if needed”.
The two regulators also considered “that there is no risk of direct contagion between the problems faced by certain banking establishments in the United States and the Swiss financial market”.
The central bank and Finma stressed that Swiss banks are subject to “strict capital and liquidity requirements”, saying Credit Suisse “satisfies” these requirements. They are higher for banks like Credit Suisse as it is a so-called “systemically important” bank.
“The pressure on Credit Suisse hit an already nervous market”
The vertiginous fall of Credit Suisse 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.
Credit Suisse has been in turmoil since the bankruptcy of the British financial company Greensill, which marked the start of a series of scandals. 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. Investors are worried about the risk of contagion after the bankruptcy of the American bank SVB. But if Credit Suisse were to face “existential problems”, then “we would be facing something of a whole other dimension”, underlined Neil Wilson, analyst at Finalto in a market commentary.
Unlike SVB, Credit Suisse is one of 30 global banks deemed too big to fail, which requires stricter regulation to be able to weather the storm. Credit Suisse launched a restructuring program in October in an attempt to recover. But some shareholders ended up throwing in the towel.
In early February, Credit Suisse announced a net loss of 7.3 billion Swiss francs (nearly 7.4 billion euros) for the 2022 financial year and warned that it still expected a “substantial” pre-tax loss in 2023
With AFP