Swiss bank Credit Suisse building in Zurich on March 10, 2022.
London/Zurich/Bern – European shares rose significantly today. The support that the Swiss financial institution Credit Suisse secured from the central bank due to liquidity problems eased fears of a global banking crisis. Credit Suisse's share price rose more than 19 percent today after falling more than 24 percent on Wednesday.
The pan-European stock index STOXX Europe 600 gained 1.19 percent today and closed at 441.64 points. Falling concerns about Credit Suisse outweighed the negative consequences of today's decision by the European Central Bank (ECB) to raise interest rates by half a percentage point. Immediately after this decision, the STOXX Europe 600 index lost 0.6 percent and fell to a new ten-week low, Reuters wrote.
On Wednesday, the index plunged by nearly three percent, marking its biggest one-day drop in more than a year. Since the beginning of the week, the index is still losing about 2.7 percent. The collapse of US financial institutions Silicon Valley Bank (SVB) and Signature Bank and the problems of Credit Suisse have caused tension in the global banking sector and caused stocks, especially banking stocks, to fall.
Credit Suisse announced today that it will strengthen its liquidity by using the option borrow up to 50 billion Swiss francs (1.2 trillion CZK) from the Swiss central bank.
The index of the Swiss stock market SMI gained 1.93 percent to 10,719.10 points today. Germany's DAX index rose 1.57 percent to 14,967.10 points and France's CAC 40 index rose 2.03 percent to 7,025.72 points.
Moody's: European Banking systems generally remain in good condition
European banking systems remain broadly sound, despite the collapse of some US financial institutions and the ongoing problems of the Swiss bank Credit Suisse. This was announced today by the American rating agency Moody's. She pointed out that European banks have a smaller portion of their assets in bonds, so they are not as much threatened by interest rate fluctuations as financial institutions in the United States.
On Tuesday, Moody's downgraded the outlook for the American banking system to “negative” from “stable “. She pointed to increased risks after the collapse of American financial institutions SVB Financial Group (SVB) and Signature Bank.
European Commissioner for Financial Services Mairead McGuinness said on Wednesday that the collapse of two American banks has only a limited impact on the European Union. European institutions point out that European banks are subject to stricter regulations, specifically the rules on bank capital adequacy known as Basel III, which are intended to increase the resilience of the banking sector.
Credit Suisse, Switzerland's second-largest bank, has had long-standing problems that culminated this week in the announcement that the bank had found serious deficiencies in its financial reporting and control procedures over the past two years. Its shares fell as much as 30 percent on Wednesday. Credit Suisse announced today that it will use the option to borrow up to 50 billion Swiss francs (CZK 1.2 trillion) from the Swiss central bank.
Moody's said today that Switzerland is able to handle shocks such as the bank's current troubles Credit Suisse. She added that she may therefore keep Switzerland's credit rating at the highest possible level of Aaa.
“The stable outlook for Switzerland's Aaa rating reflects our expectation that very strong economic fundamentals, sufficient fiscal space and highly effective institutions will enable Switzerland to effectively manage shocks such as the current one affecting banking systems around the world,” the agency said.
Swiss government expects economic growth to slow to 1.1 percent this year
The rate of growth of the Swiss economy this year will slow to 1.1 percent from last year's 2.1 percent. Next year, however, the gross domestic product (GDP) could show growth of 1.5 percent. This follows from the outlook published today by the Swiss State Secretariat for Economic Affairs (SECO). Rating agency Moody's subsequently stated that Switzerland is able to handle shocks such as the current difficulties of the Credit Suisse bank. She added that she may therefore keep Switzerland's credit rating at the highest possible level of Aaa.
Credit Suisse, Switzerland's second-largest bank, has had long-standing problems that culminated this week in the announcement that the bank had found serious deficiencies in its financial reporting and control procedures over the past two years. Its shares fell as much as 30 percent on Wednesday. Today, Credit Suisse announced that it will use the option to borrow up to 50 billion Swiss francs (1.2 trillion CZK) from the Swiss central bank.
“The stable outlook for Switzerland's Aaa rating reflects our expectation that a very strong economic fundamentals, sufficient fiscal space and highly effective institutions will enable Switzerland to effectively manage shocks such as the current one affecting banking systems around the world,” Moody's said.
According to today's SECO forecast, the growth of the Swiss economy this year will be below the long-term average, but slightly higher than the government expected in December. At the time, she estimated growth at one percent. “The situation on the energy market in Europe has calmed down in recent months. However, inflationary pressures at the international level remain high,” the secretariat said. He added, however, that the economy should not slip into recession.
Between 2012 and 2019, before the covid-19 pandemic, Switzerland's gross domestic product grew at an average rate of 1.8 percent per year. Last year, according to the preliminary estimate of the secretariat, the economy grew by 2.1 percent. It was helped by a mild winter, thanks to which Europe avoided an energy crisis, and an improvement in supply chain problems.
Inflation is expected by the secretariat to drop to 2.4 percent this year from 2.8 percent last year. Next year, he expects a further decrease, to 1.5 percent.
Inflation, which reduces the purchasing power of consumers, is holding back the economy. The increase in interest rates in Switzerland and abroad dampens the demand of companies and consumers.
The Credit Suisse bank said on Wednesday that it expects Switzerland's GDP to grow by 0.8 percent this year. Next year, the growth rate is expected to accelerate to 1.4 percent. The Swiss central bank will publish its outlook on March 23, Reuters reported.
In its winter macroeconomic forecast, the European Commission (EC) estimated that the economy of the countries of the European Union will show growth of 0.8 percent this year and 0.8 percent next year by 1.6 percent. Inflation will then slow to 6.4 percent this year from 9.2 percent last year and will reach 2.8 percent next year, the EC predicted.