Credit Suisse fails to reassure and collapses on the stock market

Credit Suisse has been in turmoil for two years, particularly after allegations of corruption and money laundering revealed by an international journalistic investigation.

The central bank and the gendarme of the Swiss financial markets finally gave verbal support to Credit Suisse on Wednesday evening, at the end of a nightmarish day for the second largest bank in the country, which collapsed on the stock market.

Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If needed, the SNB will make liquidity available to Credit Suisse, say the Swiss National Bank (SNB) and FINMA in a joint statement issued in the early evening, after a day of surprising silence. /p>

At the close, Credit Suisse shares were down 24.24% and a market capitalization of just under 6.7 billion francs (almost C$10 billion). Not much, for one of the 30 banks in the world considered too big to fail.

Perceived as the weakest link in Switzerland, the establishment saw its share price drop by up to 30% to hit a new all-time low of 1.55 Swiss francs (approximately C$2.29) despite the #x27;intervention by its chairman, Axel Lehmann, and its managing director, Ulrich Körner, to try to raise the bar.

For the SNB and FINMA, the current turbulence on the US banking market do not suggest that there is a risk of direct contagion for Swiss institutions.

In an interview with the Channel News Asia television channel, retweeted by the bank, Ulrich Körner, multiplied the reassuring words: We are a solid bank, we are a global bank under Swiss regulation.

>

We meet and exceed virtually all regulatory requirements, he added, adding: our capital, our liquidity base is very, very strong.

The concern goes beyond the borders of the Alpine country and the US Treasury Department said it was monitoring the situation and being in contact with its international counterparts.

In France, Prime Minister Elisabeth Borne publicly called on the Swiss authorities to settle the bank's problems and asked his finance minister to speak to his counterpart in Bern.

This dizzying fall began after statements by the Chairman of the Saudi National Bank, 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. According to Swiss law, FINMA would have to decide if it crossed the 10% threshold.

In an interview with Reuters, Mr. Al-Khudairy nevertheless said he was very happy with the restructuring program of Credit Suisse, referring to a very solid bank.

Founded in 1856, Crédit Suisse is a pillar of the Swiss financial centre, but it has been in turmoil since the bankruptcy of the British financial company Greensill, which marked the start of a series of scandals that weakened the bank .

Since March 2021, the stock has lost over 83% of its value.

The pressure on Credit Suisse has hit an already jittery market, Rabobank analyst Jane Foley told AFP.

The new shareholder's statements have struck a chord as investors worry about the risk of contagion following the collapse of US bank Silicon Valley Bank (SVB).

It seems that there are increasingly worried investors, Finalto analyst Neil Wilson pointed out in a market commentary.

But if Credit Suisse comes to face existential problems, then we would be faced with something from a whole other dimension. It really is too important to let go, he insisted.

Unlike SVB, which went bankrupt last week, Credit Suisse is one of 30 banks globally deemed too big to fail, placing it under stricter regulations to to be able to withstand the shock in the event of difficulty.

Contacted by AFP, the Swiss Central Bank, which has not yet expressed its opinion, declined to comment.

Credit Suisse launched a major restructuring program in October in an attempt to recover. But some shareholders ended up throwing in the towel, like the American investment company Harris Associates, long its largest shareholder, which revealed last week that it had sold its entire stake in the company. bank.

In early February, Credit Suisse disclosed a net loss of 7.3 billion Swiss francs (approximately C$10.8 billion) for fiscal year 2022 on background of massive withdrawals of funds from its clients and had warned to still expect a substantial pre-tax loss in 2023.