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Geneva, March 16 (BNA): Swiss bank Credit Suisse announced Thursday that it will act to shore up its finances, borrowing up to $54 billion from the central bank after its shares fell, leading other major European banks to retreat in the wake of bank failures. in the United States of America.
Credit Suisse said it would exercise an option to borrow up to 50 billion francs ($53.7 billion) from the central bank.
“This additional liquidity will support the core business of Credit Suisse customers as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around customer needs,” the bank said.
Sparking fresh concerns about the health of financial institutions in the wake of the recent collapse of Silicon Valley and Signature Bank in the US, at one point Credit Suisse shares lost more than a quarter of their value on Wednesday.
The share price hit a record low after the bank’s largest shareholder, the National Bank of Saudi Arabia, told news outlets that it would not inject more money into the Swiss bank, which had been in trouble long before the collapse of US banks.
The Saudi bank is seeking to sidestep regulations by starting with a stake of more than 10%, having invested around CHF1.5 billion to acquire a holding just below that limit.
The turmoil led to an automatic halt in the trading of Credit Suisse shares in the Swiss market, and sent shares of other European banks down, some by double digits.
Speaking on Wednesday at a financial conference in the Saudi capital, Riyadh, Credit Suisse Chairman Axel Lehmann defended the bank, saying: “We’ve already taken medicine” to reduce risks.
Asked if he would rule out government aid in the future, he said: “It’s not an issue… We are organized.
We have very strong capital ratios and a very strong balance sheet. We’re all hand-to-hand so it’s not an issue at all.”
The Swiss Central Bank announced late Wednesday that it was ready to act, saying it would support Credit Suisse if needed. A statement issued by the bank did not specify whether the support would come in the form of cash, loans or other assistance. The regulators said they believed the bank had enough money to meet its obligations.
The day before, Credit Suisse reported that directors had identified “material weaknesses” in the bank’s internal controls over financial reporting up to the end of last year. This raised new doubts about the bank’s ability to weather the storm.
Credit Suisse fell nearly 30% to around CHF1.6 ($1.73), before slumping to a 24% loss of CHF1.70 ($1.83) at the close of trading on the SIX exchange. At its lowest point, the price is down more than 85% from February 2021.
After the joint announcement from the Swiss National Bank and the Swiss financial markets regulator, stocks made some ground on Wall Street.
The stock suffered a long and persistent decline: in 2007, the bank’s shares traded at more than 80 francs ($86.71) each.
With concerns about the potential for more hidden problems in the banking system, investors rushed to sell bank stocks.
France’s Societe Generale SA fell 12% at one point. France’s BNP Paribas fell more than 10 percent. Germany’s Deutsche Bank fell by 8%, and Britain’s Barclays fell by nearly 8%. Trading in the two French banks was briefly suspended.
The STOXX Banks Index of 21 leading European banks fell 8.4% after the relative calm in the markets on Tuesday.
Stocks in US markets were mixed on Wednesday, with the Nasdaq Composite up 0.1% while the S&P 500 was down 0.7%. The Dow Jones Industrial Average finished down 0.9% after posting larger losses early in the session.
Japanese banks resumed their downward trend, with Resona Holdings, the country’s fifth bank, down 5% while other major banks fell more than 3%.
The turbulence came a day before the European Central Bank meeting. President Christine Lagarde said last week, before the US failures, that the Bank would “probably” raise interest rates by half a percentage point to fight inflation. Markets have been watching closely to see if the bank continues to operate despite the recent turmoil.
Andrew Kenningham, chief European economist at Capital Economics, said Credit Suisse is “a much bigger concern for the global economy” than the collapsed mid-sized US banks.
It has several subsidiaries outside of Switzerland and handles trading for hedge funds.
“Credit Suisse is not only a Swiss problem, but a global problem,” he said.
He noted, however, that “the bank’s problems were well known and do not come as a complete shock to investors or policymakers.”
The problems, Kenningham said in a note, “once again raise the question of whether this is the beginning of a global crisis or just another ‘special’ case.” Credit Suisse was widely seen as the weakest link among the major European banks, but it is not the only bank. which has suffered from weak profitability in recent years.
FKN