Investors sent Credit Suisse’s stock price skyrocketing. The lifeline of more than 50 billion Swiss francs (or 50.67 billion euros) launched by the Swiss Central Bank (SNB) to the banking giant reassured the world markets: at the opening of the session, Thursday 16 March, the title Credit Suisse jumped more than 30% in a strong volume of exchanges. At the same time, the European stock markets recovered Thursday morning by 1.43% in Paris, 1.26% in Frankfurt, 1.27% in London and 1.21% in Milan, following their plunge the day before.
The Zurich establishment is one of the thirty global banks considered too important to let them fail and must therefore have adequate reserves to face a crisis.
The Swiss government held a special meeting on Thursday during which it was briefed on the situation by the Swiss financial sector regulator (Finma) and the central bank, Swiss news agency ATS reported. The government has not commented on the matter.
On Wednesday, the action of Credit Suisse had suffered the worst session in its history following a movement of panic following the statements of its largest shareholder, the National Bank of Saudi Arabia (SNB). The action had hit a historic low of 1.55 Swiss francs (1.58 euros), to finally close down 24.24%.
To stop the panic movement, Credit Suisse announced in the middle of the night in Europe that it was going to call on the SNB to borrow up to 50 billion Swiss francs (50.8 billion euros) in order to “reinforce preventively” its cash. It will also carry out a series of debt buyback operations for approximately 3 billion Swiss francs.
Ulrich Körner, head of Credit Suisse, judged “decisive” the measures announced and ensured that “the bank continues [sa] strategic transformation ».
“No risk of direct contagion”
Earlier in the evening of Wednesday and following a day of astonishing silence, the SNB and Finma had assured that the finances of the bank 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 estimated “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 recalled that Swiss banks are subject to “strict capital and liquidity requirements”considering that Credit Suisse ” satisfied “ these requirements. They are higher for banks like Credit Suisse, as it is a so-called significant bank “systemic”.
It all started on Wednesday morning with a statement from the president of the Saudi National Bank. The bank has been Credit Suisse’s biggest shareholder, ever since it bailed out in November, with a stake of just under 10%.
Movements going beyond the Swiss Stock Exchange
Ammar Al-Khudairy said that his establishment does not count ” absolutely not “ investing more in Credit Suisse, saying the drag was mostly regulatory. Crossing the threshold above 10% would involve obtaining the approval of Finma, the market surveillance authority in Switzerland.
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Although he said he was very satisfied with Credit Suisse’s restructuring plan, his remarks sparked panic on the stock in a market very worried regarding the risks of contagion following the bankruptcy of the American Silicon Valley Bank (SVB). .
The fall in Credit Suisse’s share price triggered movements far beyond the Swiss stock market on Wednesday. The Treasury Department said it was monitoring the situation and being in contact with its counterparts in other countries.
Credit Suisse shares have lost more than 87% of their value since the March 2021 bankruptcy of British financial company Greensill, which marked the start of a series of scandals that have weakened the bank.