Swiss regulators have stated that they are prepared to assist struggling banking behemoth Credit Suisse “if necessary,” as concerns over a broader crisis have been raised by the failure of Silicon Valley Bank in the US.
The Swiss National Bank made its remarks after Credit Suisse shares fell 24% to a historic low.
Investors are worried about how the struggling company is doing and have already been alarmed by American bank collapses.
The concerns spread to the stock markets, causing a severe decline in all major indices.
The Swiss Financial Market Supervisory Authority and the Swiss National Bank (SNB) worked to allay concerns. In a joint statement, they stated that there were “no signs of a direct danger of contagion” for Swiss banks as a result of the recent instability in the US banking system.
In order to “guarantee their stability,” strict regulations are applied to Swiss financial institutions. According to the regulators, Credit Suisse satisfies the criteria for systemically important banks.
The SNB will give [Credit Suisse] liquidity if required, they said.
Earlier, there had been pressure on banking shares all around the world due to concern over weakness at such a significant international player, with the Stoxx Europe banking stock index falling 7%.
The FTSE 100 in the UK dropped 3.8%, or 293 points, marking the largest one-day decrease since the pandemic’s early stages in 2020.
The Cac 40 index in France recently closed by about 3.5% while the Dax in Germany down or more than 3%. The Ibex 35 closed more than 4% lower in Spain. In the United States, shares of both small and major banks suffered, which contributed to the Dow’s down of over 0.9% and the S&P 500’s decline of 0.7%. The Nasdaq ended the day essentially flat.
According to Capital Economics’ Andrew Kenningham, “The issues at Credit Suisse once again raise the question of whether this is the start of a worldwide catastrophe or just another ‘idiosyncratic’ episode.
The failure of Silicon Valley Bank, the 16th-largest bank in the US, last week marked the start of issues in the banking sector.
The bank was closed down by US authorities on Friday, marking the biggest failure of a US institution since 2008. The bank was known for lending to technology companies. The UK division of SVB was purchased by HSBC for £1.
Following the SVB failure, the New York-based Signature Bank similarly failed, with all assets at both institutions being guaranteed by US regulators.
But, worries that other banks may experience similar problems have persisted, and this week’s trade in bank stocks has been volatile.
Bottom Line
In a yearly letter to investors, BlackRock CEO Laurence Fink stated that it is too soon to determine the extent of the damage. “The regulatory response has been prompt thus far, and prompt decisions have assisted in reducing the risk of contagion. Yet the markets are still tense.”
Credit Suisse, which was established in 1856, has recently dealt with a number of crises, including accusations of money laundering and other problems.
It experienced losses in 2021 and 2022, its worst years since the 2008 financial crisis, and has warned that it does not anticipate turning a profit until 2024.
