Swiss Central Bank Ready To Backstop Credit Suisse With Funds
The Swiss National Bank (SNB) stands ready to provide Credit Suisse with emergency liquidity as the bank’s shares plummeted in a day of market turmoil.
The central bank issued a joint statement with the Swiss Financial Market Supervisory Authority (FINMA) on Wednesday evening in an attempt to calm markets.
Credit Suisse shares fell nearly 25% at the close of trading at CHF1.69 per share – an historic low for Switzerland’s second largest bank.
Other bank shares also suffered with three banks in the United States collapsing in recent weeks.
“The problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets,” read the SNB/FINMA joint statement. “If necessary, the SNB will provide CS [Credit Suisse] with liquidity.”
The move sends out a signal that the Swiss financial authorities will go to extraordinary lengths to avert the collapse of a bank deemed ‘too big to fail’.
It is also probably designed to convince depositors to keep their money at Credit Suisse, thus avoiding a bank run.
The SNB’s promise of emergency liquidity came after Credit Suisse’s largest shareholder, the Saudi National Bank, said it would not stump up any more money after injecting billions into the bank last year.
Another major shareholder, Harris Associates, had earlier said it would sell its stake in Credit Suisse.
FINMA added that “Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks”.
This means the regulator is satisfied that Credit Suisse has enough capital to absorb market volatility.
This is not the first time that the Swiss central bank has rushed to the aid of an ailing commercial bank.
In 2008, the SNB took toxic mortgage loan-related assets from UBS to keep the bank afloat during the financial crisis.
Credit Suisse has endured a disastrous few years, culminating in a CHF7.3 billion loss in 2022. That same year, the bank said it would shed 9,000 jobs in an attempt to revive its fortunes.