16.03.2023
The Swiss National Bank extended a helping hand to Credit Suisse Bank, which was in financial crisis, and provided Credit Suisse with a loan of 50 billion Swiss francs. Will this huge sum of money have a way to alleviate the current crisis?
(Deutsche Welle Chinese website) Following last weekThree U.S. banks, including Silicon Valley Bank, declare bankruptcy, Switzerland’s second largest bank – Credit Suisse (Credit Suisse) also encountered a crisis this week. Its largest shareholder, the National Bank of Saudi Arabia, issued a statement on Wednesday (March 15) stating that it will never further increase its capital on the basis of the existing 9.8% stake in Credit Suisse. After the news was released, it triggered panic selling in the market, and Credit Suisse’s stock price plummeted 24% on the same day, closing at 1.69 Swiss francs per share.
Subsequently, the Swiss government agreed to an emergency rescue. On March 16, Credit Suisse announced that it had arranged to borrow up to 50 billion Swiss francs from the Swiss National Bank, and at the same time said it would buy back up to 3 billion Swiss francs in US dollar and euro-denominated debt. The Swiss government also stated that it is willing to acquire shares of Credit Suisse if necessary, as one of the ways to increase the capital of Credit Suisse. The SNB and the Swiss Financial Market Supervisory Authority (Finma) issued a statement reassuring that the bank is in good financial standing and meets the strict standards of banking regulations.
Credit Suisse CEO Ulrich Körner, who will take office in August 2022
Credit Suisse has been embroiled in several major scandals in recent years, including the collapse of hedge fund Archegos and the collapse of Lex Greensill, founder of British financial services firm Greensill Capital. As a result, many investors withdrew their funds, dealing a further blow to Credit Suisse.
Coupled with the impact of Credit Suisse’s internal restructuring and the global situation, its operating conditions have become even worse. The bank’s net loss in 2021 will reach 1.65 billion Swiss francs, and the net loss in 2022 will be as high as 7.3 billion Swiss francs.
systemically important
Compared with Silicon Valley Bank, Credit Suisse is one of the 30 institutions in the world that are considered systemically important, so its role in the financial world is even more important. If it fails, it will have a considerable impact on other financial institutions.
Hans-Peter Burghof, a professor at the Department of Banking and Financial Services at the University of Hohenheim in Germany, said: The good news is that Credit Suisse’s total assets and liabilities have shrunk to 500 billion euros, which is two-fifths of its previous size. Average size of large financial institutions.
Credit Suisse headquarters in Zurich
Investor confidence is key
Still, Berghoff believes Credit Suisse has taken too long to restructure: “Other banks like Deutsche Bank or Commerzbank have already done their homework, so they are less vulnerable now.” Another bank at the Frankfurt School of Finance and Management Industry expert Christoph Schalast also cited Credit Suisse’s “slowly progressing restructuring”.
Credit Suisse’s stock price has slowly recovered following the Swiss National Bank is willing to assist. In the opinion of experts, whether investors can regain confidence in Credit Suisse is very important for the next development of the matter. Problems start when investors lose confidence in a bank, Schalluster said.
(comprehensive report)
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