Credit Suisse has asked the Swiss National Bank to publicly support it after its shares plunged 31% on Wednesday, dragging down stock markets.
The cost of credit default swaps (CDS), which assess the likelihood of Credit Suisse's insolvency, has almost tripled the level seen during the 2008 global financial crisis.
Source. This was reported by the Financial Times.
Just a few hours before the appeal to the central bank, the chairman of the board of directors of Credit Suisse, Axel Lehmann, assured that the bank has a strong balance sheet and does not need government assistance.
At the same time, Credit Suisse's problems began a long time ago, when its shares fell by 82% in two years.
In addition, the Saudi shareholder of the Swiss bank provoked a collapse in its quotations on Wednesday. Saudi National Bank, which acquired a 10% stake in Credit Suisse in 2022 and helped raise CHF 4 billion in capital, said it would not provide additional financial support to the bank.
After that, the quotes flew down, and the bank's market value fell below 7 billion francs.
On Tuesday, Credit Suisse reported that its auditor, PwC, had found "significant weaknesses" in the bank's financial reporting controls. Last week, it postponed the publication of its annual report after the US Securities and Exchange Commission requested additional information about the problems.
The prices of Credit Suisse dollar bonds with different maturities fell to 65-73% of the face value.
"The Swiss National Bank's intervention and financial support seems inevitable," Octavio Marenzi, an analyst at Opimas, told the FT. "It and the government are well aware that the collapse of Credit Suisse or even any loss of depositors would undermine Switzerland's reputation as a global financial center.
The European Central Bank has asked banks in Europe to report their exposure to Credit Suisse, a person familiar with the matter told the FT. The US Treasury Department and the Federal Reserve did the same.
Credit Suisse's assets amounted to $580 billion at the end of 2022, while the American Silicon Valley Bank (SVB), which collapsed a few days ago, had $209 billion in March.
The collapse of SVB, which had $175 billion in deposits, was the second largest in US banking history, and Signature Bank, which the authorities closed on Sunday, was the third ($110.4 billion in assets and $88.6 in deposits).
The problems of these banks triggered a collapse in global stock markets: shares of banks included in the European Stoxx 600 index fell by 16% over the past week.
Societe Generale, Deutsche Bank, Barclays, ING lost 7-11% on Wednesday.
Shares of Citigroup and JPMorgan Chase fell by 5% in morning trading in the US.
The collapse of SVB could be the beginning of a "slowly unfolding" crisis in the US financial system, with new banks closing, Larry Fink, CEO of BlackRock, the world's largest management company, warned in a letter to investors.
Background. As reported, the American banking crisis after the fall of Credit Suisse has spread to Europe.