Politicians hailed the support of the Swiss National Bank (SNB) to Credit Suisse (CS) to the tune of 50 billion francs. Meeting Thursday for a special meeting, the Federal Council does not comment on the content of the discussions.
The Federal Council was informed in the afternoon by representatives of the Swiss Financial Market Supervisory Authority (Finma) and the Swiss National Bank (SNB) on the situation of the bank. The content of the discussions will not be communicated, the Federal Chancellery told Keystone-ATS on Thursday after this meeting, without providing further details.
The government had deemed it urgent to meet on this file. A regular meeting of the Federal Council is scheduled for Friday, session requires.
After several days of tension, the Swiss National Bank (SNB) flew to the aid of Credit Suisse, a support unanimously welcomed by the bourgeois camp. On the left, the PS however demands “complete transparency” on the case, that those responsible are accountable and does not want shareholders to benefit from the restoration of the title allowed by public support.
International pressure
The announcements of support arrived from Wednesday evening, despite management’s attempts to reassure the financial health of the two-veiled establishment. Faced with growing international pressure, the SNB and Finma assured the bank of their support.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will make liquidity available to Credit Suisse,” the two institutions said in a joint statement.
And on the night of Wednesday to Thursday, Credit Suisse resolved to accept this aid. The bank has indeed indicated that it would borrow up to 50 billion francs from the SNB to “strengthen”. At the same time, the establishment announced a series of debt buyback operations for around 3 billion francs.
The struggling bank “is taking decisive action to preventively strengthen its liquidity,” it said in a statement. These additional funds will strengthen the core business of the group and the activity with customers.
Decisive Actions
Regarding the debt buyback operations, Credit Suisse detailed that it had made a cash offer for ten dollar debt securities for a maximum total amount of $2.5 billion, as well as for four euro bonds for a maximum amount of 500 million euros.
For the managing director of the number two Swiss bank, Ulrich Körner, “these measures demonstrate the decisive actions taken to strengthen Credit Suisse”, welcoming in passing the support of the SNB and the regulator Finma.
The Zurich banking group, classified as systemically important by the Swiss authorities, posted a hard capital ratio (Tiers 1) of 14.1% at the end of last year, compared to 12.6% at the end of September. The debt ratio (CET1) was at 5.4%, up from 4.1% at the end of September. The one measuring the level of liquidity is currently around 150%.
Net price recovery
On the equity market, CS securities recovered on Thursday, with an increase of around 19.15% to 2.022 francs. Credit Suisse shares fell sharply on Wednesday, in a market fueled by fears for the banking sector.
The main shareholder of the Zurich banking group, Saudi National Bank (SNB), had further added fuel to the fire by excluding any new financial support. At the close of the Swiss Stock Exchange, the title sank 24.2% to 1.697 francs, after a new historic low of 1.55 francs. As of Thursday morning, the title rebounded strongly, soaring 26.2% to 2.141 francs.
Faced with turbulence on the financial markets, French Prime Minister Elisabeth Borne had asked the Swiss authorities on Wednesday to resolve the problems of the establishment of the Paradeplatz. “This subject is the responsibility of the Swiss authorities. It must be settled by them,” she said before the Senate.
In the United States, the Treasury Department had indicated that it was in contact with its counterparts in other countries regarding Credit Suisse and monitoring the situation.
Doubts for the long term
While analysts applauded the immediate help provided by the SNB, some were nonetheless skeptical about what would follow. Many investors “fear that the news around the big bank Credit Suisse will not be the last,” warned Jochen Stanzl of CMC Markets. “The specter of a new bankruptcy like that (of the American investment bank) Lehman hangs over the markets, he added.
As for the experts of DZ Bank, they say they are “skeptical about the long-term success of the bank’s restructuring. In normal times, restructuring is already a titanic task, whereas now, as a headwind, there is widespread skepticism of the market towards the banks”.
ats, awp