Last night, the Swiss financial authorities tried to calm the markets by offering support to the bank in crisis Credit Suisse.
The company had pleaded with the Swiss National Bank to intervene after a massive drop in its share price set off alarm bells around the world – and involved Bank of England officials in talks to urgency with their counterparts in the global financial system.
Credit Suisse shares fell 30% yesterday before ending down 24%, triggering an emergency trading halt on the Swiss stock exchange. The crash came as the chairman of Credit Suisse’s biggest backer, Saudi National Bank, ruled out providing more cash to the company due to regulatory concerns.
But in a dramatic intervention last night, the Swiss National Bank said: “Credit Suisse complies with the capital and liquidity requirements imposed on systemically important banks.” If necessary, the SNB will provide liquidity to CS.
Last night Bank of England officials were assessing the impact of a possible collapse of Credit Suisse, the Telegraph reported.
Swiss financial authorities had pleaded with the Swiss National Bank to intervene after a massive drop in its share price set off alarm bells around the world
Pictured: A trader works on the floor of the New York Stock Exchange on March 15, 2023
Yesterday’s panic followed an admission by Credit Suisse on Tuesday that “significant weaknesses” had been identified in its financial reporting controls.
The 167-year-old Zurich-based bank has been in crisis for several months as it seeks to recover from a series of scandals that have shaken the confidence of its investors and customers and led to the withdrawal of billions of dollars.
These were compounded by the collapse last week of US group Silicon Valley Bank (SVB) – the biggest bank failure since the 2008 financial crisis, which has raised wider concerns about the stability of the whole of the financial sector. But while SVB focused on a niche in the economy – primarily tech start-ups – a failure at Credit Suisse could have larger effects due to its size and deep ties to the banking system.
In a stern warning, economist Nouriel Roubini, nicknamed Dr Doom, said a Credit Suisse collapse would be a “Lehman moment” – a reference to major US investment bank Lehman Brothers which went bankrupt in August 2007 at the start of the global financial crisis. crisis.
Credit Suisse shares fell 30% yesterday before ending down 24%, triggering an emergency trading halt on the Swiss stock exchange.
The statement from the Swiss National Bank last night said that “the problems of certain banks in the United States do not pose a direct risk of contagion for Swiss financial markets”.
Credit Suisse’s woes quickly spread to other major European banks, with France’s BNP Paribas and Societe Generale collapsing by more than 10%.
Meanwhile, Germany’s Deutsche Bank fell more than 9% while rival Commerzbank fell 8.8%. Fellow Swiss bank UBS also fell nearly 9%.
In the UK, shares of Barclays fell 9%, Lloyds more than 4%, NatWest 6%, HSBC 5% and Standard Chartered 7.7%.
Panic also crossed the Atlantic to hit US bank stocks as JP Morgan fell 5.5%, Morgan Stanley 6.7%, Goldman Sachs 5.2% and Bank of America 3%.
Pictured: London (file photo). In the UK, shares of Barclays fell 9%, Lloyds fell more than 4%, NatWest fell 6%, HSBC fell 5% and Standard Chartered fell 7.7%.
Susannah Streeter, of financial services firm Hargreaves Lansdown, said: “The new bank selloff has taken hold as fears rise to the surface over the robustness of the sector with the shadow of the SVB collapse looming large. The nervousness is super high and it’s spilled into a hot mess in Europe.
Larry Fink, head of the world’s largest asset manager, BlackRock, warned that the US financial system was facing a “slow crisis” following the collapse of the SVB and that “further foreclosures and closures” were to come. coming.
In a letter to the company’s investors, Mr Fink compared the current upheaval to the savings and loans crisis of the 1980s, when more than 1,000 lenders collapsed.
He added that recent interest rate hikes were “the first domino to fall” and predicted banks would tighten lending requirements due to uncertainty.
The panic gripping the global banking sector comes amid fears that financial institutions could suffer heavy losses after investing in government debt during the pandemic. SVB itself had invested heavily in US government debt, which, while generally safe investments, saw its value plunge as interest rates rose.
It came as the London Stock Exchange’s FTSE 100 index suffered its worst day since Russia invaded Ukraine in February last year.
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