Credit Suisse: Will emergency lifeline calm fears of global banks?

Shares of Credit Suisse jumped this morning after the Swiss central bank intervened to bolster investor confidence.

Shares of the ‘struggling’ private lender fell 30% yesterday after one of its major shareholders, Saudi National Bank, ruled out further investment, the report said. FinancialTimes. The sale “weighed on banking stocks in Europe and the United States”, which were “shocked” by the collapse of Silicon Valley Bank (SVB).

But the news that Credit Suisse will borrow up to $54bn (£45bn) from the Swiss National Bank sent stocks rebounding. “This decision means that Credit Suisse will become the first major global bank to receive an emergency lifeline since the 2008 financial crisis,” said The telegraph.

What were the newspapers saying?

Switzerland’s second-largest bank has been “plagued by mismanagement for almost two decades,” Andrés R. Martínez told The New York Times, but the latest crisis erupted after three US banks – SVB, Silvergate and Signature Bank – collapsed in quick succession. “Their combined fortunes have triggered swings in markets, pushed Credit Suisse shares to a record high and reignited fears of contagion that could lead to a global recession.”

However, the Swiss bank “is widely seen as having got into its own trouble”, according to Quartz.

An “unprecedented” number of its customers had already “voted with their feet” last year following a chess seriessaid The Washington Post. These failures included an industrial espionage scandal and a massive leak from customer data to the media. Credit Suisse has also been found guilty by Swiss authorities of failing to prevent money laundering by a suspected Bulgarian cocaine gang.

And ‘the bank’s association with a disgraced financier Lex Greensil and the bankruptcy of New York-based investment firm Archegos Capital Management deepened feelings of an institution that lacked a firm grip on its affairs,” the newspaper continued.

A subsequent effort to “bring nervous customers back” appeared to bear fruit until the bank was forced to delay its annual report earlier this month, following requests from the States Securities and Exchange Commission. -United. “Panic spread” when SVB collapsed last week, with investors “dropping anything that smacked of bank risk and deposit flight”.

Although the Swiss National Bank’s subsequent lifeline provided a “moment of relief for investors,” said CNBC, the “precipitous loss of confidence” has “prompted some to question the ‘true’ value of Credit Suisse’s share price.” Fears about the health of the banking system as a whole have also spread from the United States to Europe.

“Some Europeans spent the weekend congratulating themselves that tougher banking regulations would shield them from the fiasco of midsize US banks,” he said. The Wall Street Journal Editorial Committee. “Well, tell that to the Swiss.”

Many hope the woes of the troubled banks are “idiosyncratic failures of business model and management”, the board added. “But we may not be so lucky.” As the world “witnesses more than one-off weaknesses and management failures”, we are faced with “a global toll of years of political illusions and financial excesses”.

This is not the case, according to the chairman of the Saudi National Bank, Ammar Al Khudairy. The latest panic was “completely unwarranted, either for Credit Suisse or for the market as a whole,” he told a CNBC television interviewer.

The Swiss Financial Market Supervisory Authority and the Swiss National Bank also issued a statement insisting that “the problems of certain banks in the United States do not pose a direct risk of contagion for Swiss financial markets” – translated by the FT Alphaville like “Credit Suisse is fine, so please relax”.

After that ?

The turmoil is likely to “force the hand of central banks, which have raised interest rates to rein in stubbornly high inflation,” Martínez told The New York Times. “The European Central Bank will play a big role in setting the tone for markets on Thursday as policymakers gather in Frankfurt to set rates.”

Credit Suisse shares were back at $2.35 this morning, from a low of $1.76 yesterday, but still below the $2.49 price recorded on Tuesday.

The Swiss National Bank’s response was ‘good’, an anonymous banking lawyer says Reuters. “It stopped the kind of immediate burning fire, but I don’t feel like all the fire is out. It’s smoldering.

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