Credit Suisse faces crucial weekend with its future in balance
NEW YORK, March 18 — 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 UBSG.S.
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 yesterday.
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 per cent 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 US lenders Silicon Valley Bank and Signature Bank over the past week, forcing it to tap US$54 billion (RM242.2 billion) in central bank funding.
In the latest sign of its mounting troubles, at least four major banks, including Societe Generale SA SOGN.PA 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 matter.
“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 more measures.”
The frantic efforts to shore up Credit Suisse come as policymakers including the European Central Bank and US 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 US banks had to swoop in with a US$30 billion lifeline for smaller lender First Republic FRC.N, while US banks altogether sought a record US$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 US 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 — yesterday 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 said.
A group of Democratic US lawmakers also asked regulators and the Justice Department for a probe into the role of Goldman SachsGS.N in the collapse of SVB, the office of US Representative Adam Schiff said yesterday.
Market troubles linger
Banking stocks globally have been battered since Silicon Valley Bank collapsed, raising questions about other weaknesses in the wider financial system.
Shares in Credit Suisse, Switzerland’s second-largest bank, closed down 8 per cent yesterday, with Morningstar Direct saying Credit Suisse had seen more than US$450 million in net outflows from its US 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.
US regional bank shares were fell sharply yesterday and the S&P Banks index .SPXBK tumbled 4.6 per cent, bringing its decline over the past two weeks to 21.5 per cent, its worst two-week calendar loss since the Covid-19 pandemic shook markets in March 2020.
First Republic Bank ended yesterday down 32.8 per cent, bringing its loss over the last 10 sessions to more than 80 per cent.
While support from some of the biggest names in US 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 yesterday, SVB Financial Group said it had filed for a court-supervised reorganisation, days after its former banking unit SVB was taken over by US regulators.
Regulators have asked banks interested in buying SVB and Signature Bank to submit bids by yesterday, people familiar with the matter have said. US 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 yesterday, 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. — Reuters