Swiss bank Credit Suisse building in Zurich on November 23, 2022.
Zurich – The second largest Swiss bank, Credit Suisse, will use the option to borrow up to 50 billion Swiss francs (CHF; 1.2 trillion CZK) from the central bank. She announced this in a press release today. Credit Suisse has had long-standing problems, culminating this week in its announcement that it had found serious deficiencies in its financial reporting and control procedures over the past two years. The help that the central bank will now provide is to strengthen liquidity.
The Central Bank later confirmed the promised aid. The Swiss government called an extraordinary meeting for today, where it focused on the situation surrounding Credit Suisse. However, the government only announced in the evening that it had met representatives of the Swiss National Bank (SNB) and financial regulator FINMA to discuss the Credit Suisse crisis. “This afternoon, the Federal Council (government) was informed by FINMA and the SNB about the situation at Credit Suisse,” a government spokesman told Reuters. No information about the content of the meeting will be provided, the spokesman added.
Swiss financial institutions already reported on Wednesday that the Swiss central bank will provide Credit Suisse with additional liquidity if necessary. They also stated that the financial institution meets the capital and liquidity requirements imposed on systemically important banks. “As part of its legal mandate, the Swiss National Bank can provide liquidity to a domestic bank in exchange for guarantees,” the central bank later said.
The Social Democratic Party of Switzerland (SPS) demands accountability for those responsible for the state of the bank. The party also requests that no bonuses be paid at Credit Suisse until the bank repays the loan.
Some analysts believe that the central bank's help will not be enough to calm investors, Reuters reported. One of the ways to strengthen the confidence of the market could be to get the support of strategic investors, which include, among others, the investment fund Qatar Investment Authority or the Saudi conglomerate Oyalan Group.
Shares of Credit Suisse fell as much as 30 percent on Wednesday. Its largest investor, which is the financial institution Saudi National Bank, is no longer able to provide further financial assistance to the Swiss bank due to regulatory obstacles. He would already have more than a ten percent stake in it.
Thanks to the help from the central bank, Credit Suisse shares strengthened sharply today, after rising by more than 30 percent in the morning, they showed growth of almost 25 percent in the afternoon and finally strengthened by 19.2 percent. Over the past year, the bank's shares have lost nearly three-quarters of their value, falling to historic lows. In 2008, their value hovered around 80 Swiss francs, closing at CHF 1.70 on Wednesday.
Credit Suisse used to be a symbol of Swiss reliability, but its reputation has been damaged by a series of scandals. The bank suffered huge losses due to the bankruptcy of the financial company Greensill, which backed Liberty Steel, and the collapse of the US fund Archegos. Other scandals included an unprecedented domestic prosecution of money laundering for a criminal gang. The bank has completely changed its top management and is undergoing a second restructuring of its activities in a short period of time.
For example, German Chancellor Olaf Scholz commented on the problems surrounding the Swiss bank today. According to him, a lot has happened in the field of regulation since the last financial crisis, and the authorities, including the Swiss ones, are able to act quickly.
However, the American shareholders of Credit Suisse sued the Swiss bank today. They claim she cheated them by hiding her problems. According to Reuters, rating company DBRS Morningstar assigns the bank a rating of BBB, while the trend remains negative. DBRS Morningstar points to concerns about the banking group's ability to restore shareholder confidence.