Credit Suisse faces crucial weekend with its future in balance
Send a link to a friend
[March 18, 2023] By
Stefania Spezzati and Oliver Hirt
(Reuters) - Credit Suisse Group AG headed into a make-or-break weekend
after some rivals grew cautious in their dealings with the struggling
Swiss lender, and its regulators urged it to pursue a deal with UBS AG.
Credit Suisse Chief Financial Officer Dixit Joshi and his teams will
hold meetings over the weekend to assess strategic scenarios for the
bank, people with knowledge of the matter said on Friday.
Swiss regulators are encouraging UBS and Credit Suisse to merge, one
source with knowledge of the matter said, but added that both banks did
not want to do so. The regulators do not have the power to force the
merger, the person said.
The boards of UBS and Credit Suisse were also expected to separately
meet over the weekend, the Financial Times said.
Credit Suisse shares jumped 9% in after-market trading following the FT
report. Credit Suisse and UBS declined to comment on the report.
Credit Suisse, a 167-year-old bank, is the biggest name ensnared by
market turmoil unleashed by the collapse of U.S. lenders Silicon Valley
Bank and Signature Bank over the past week, forcing it to tap $54
billion in central bank funding.
In the latest sign of its mounting troubles, at least four major banks,
including Societe Generale SA and Deutsche Bank AG, have put
restrictions on their trades involving the Swiss lender or its
securities, according to five sources with direct knowledge of the
"Credit Suisse is a very special case," said Frédérique Carrier, head of
investment strategy at RBC Wealth Management. "The Swiss central bank
stepping in was a necessary step to calm the flames, but it might not be
sufficient to restore confidence in Credit Suisse, so there’s talk about
The frantic efforts to shore up Credit Suisse come as policymakers
including the European Central Bank and U.S. President Joe Biden have
sought to reassure investors and depositors that the global banking
system is safe. But fears of broader troubles in the sector persist.
Already this week, big U.S. banks had to swoop in with a $30 billion
lifeline for smaller lender First Republic, while U.S. banks altogether
sought a record $153 billion in emergency liquidity from the Federal
Reserve in recent days.
That surpassed a previous high set during the most acute phase of the
financial crisis some 15 years ago.
This reflected "funding and liquidity strains on banks, driven by
weakening depositor confidence," said ratings agency Moody's, which this
week downgraded its outlook on the U.S. banking system to negative.
In Washington, focus turned to greater oversight to ensure that banks -
and their executives - are held accountable.
Biden - who earlier this week promised Americans that their deposits are
safe - on Friday called on Congress to give regulators greater power
over the banking sector, including leveraging higher fines, clawing back
funds and barring officials from failed banks, a White House statement
A group of Democratic U.S. lawmakers also asked regulators and the
Justice Department for a probe into the role of Goldman Sachs in the
collapse of SVB, the office of U.S. Representative Adam Schiff said on
MARKET TROUBLES LINGER
Banking stocks globally have been battered since Silicon Valley Bank
collapsed, raising questions about other weaknesses in the wider
[to top of second column]
A view of the Credit Suisse office in
Singapore March 16, 2023. REUTERS/Caroline Chia
Shares in Credit Suisse, Switzerland's second-largest bank, closed
down 8% on Friday, with Morningstar Direct saying Credit Suisse had
seen more than $450 million in net outflows from its U.S. and
European managed funds from March 13 to 15.
Analysts, investors and bankers think the loan facility from the
Swiss central bank - which made it the first major global bank to
take up an emergency lifeline since the 2008 financial crisis - only
bought it time to work out what to do next.
Increased financial volatility and uncertainty about Credit Suisse's
future may cloud Switzerland's economic outlook, but the liquidity
support provided to the bank is unlikely to impact the country's
public finances, DBRS Morningstar wrote in a note to investors.
U.S. regional bank shares were fell sharply on Friday and the S&P
Banks index tumbled 4.6%, bringing its decline over the past two
weeks to 21.5%, its worst two-week calendar loss since the COVID-19
pandemic shook markets in March 2020.
First Republic Bank ended Friday down 32.8%, bringing its loss over
the last 10 sessions to more than 80%.
While support from some of the biggest names in U.S. banking
prevented its collapse this week, investors were startled by First
Republic's late disclosures on its cash position and just how much
emergency liquidity it needed.
"It appears that maybe the damage has been done to the brand
reputation of First Republic. (It) is a shame because it was a high
quality, well run bank," said John Petrides, portfolio manager at
Tocqueville Asset Management.
Earlier on Friday, SVB Financial Group said it had filed for a
court-supervised reorganisation, days after its former banking unit
SVB was taken over by U.S. regulators.
Regulators have asked banks interested in buying SVB and Signature
Bank to submit bids by Friday, people familiar with the matter have
said. U.S. regulators are willing to consider having the government
backstop losses at SVB and Signature Bank if it helps push through a
sale, the Financial Times reported on Friday, citing people briefed
on the matter.
Authorities have repeatedly tried to emphasise that the current
turmoil is different than the global financial crisis 15 years ago
as banks are better capitalised and funds more easily available -
but their assurances have often fallen on deaf ears.
In an unusual move, the ECB held an ad hoc supervisory board
meeting, its second this week, to discuss the stresses and
volatility in the banking sector.
The supervisors were told deposits were stable across the euro zone
and exposure to Credit Suisse was immaterial, a source familiar with
the meeting's content told Reuters.
An ECB spokesperson declined to comment.
(Reporting by Pete Schroeder, Jeff Mason and Costas Pitas in
Washington, Shankar Ramakrishnan and Chuck Mikolajczak in New York,
Sumeet Chatterjee, Joice Alves in London, Alexandra Hudson in
Zurich, Francesco Canepa in Frankfurt and Medha Singh in Bengaluru,
Noel Randewich in Oakland, California; Writing by Deepa Babington,
Sam Holmes and Alexander Smith; Editing by Anna Driver, Matthew
Lewis and Diane Craft)
[© 2023 Thomson Reuters. All rights
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.