Investing.com – Updated at 19:33 GMT
The Swiss Central Bank announced its readiness to provide Credit Suisse with liquidity if needed. Equity markets moved positively on the back of this data.
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Updated at 18:51 GMT
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Updated at 18:06 GMT
The US Federal Reserve is now meeting with the Treasury Department to assess the exposure of US banks and companies to Credit Suisse in light of the collapse.
While the European Union is asking its lenders to announce the extent of their exposure to the ailing bank.
The bank’s credit default swaps (CDS) reached their highest levels, even what is known as the danger zone.
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The Swiss Credit Suisse Bank submitted a request for support from the Swiss National Bank after the collapse of its shares by more than 30%, to continue with it the cycle of the fall of global banks and markets.
Help
Credit Suisse appealed to the Swiss National Bank to show public support after its shares fell by as much as 30 per cent, which led to a large-scale sell-off of shares of European, American and Arab banks as well. The request for a reassuring statement on Credit Suisse’s financial health came after its shares fell to CHF1.56, having earlier stalled amid a sell-off, according to three people familiar with the talks quoted by The Financial Times.
Credit Suisse has also requested a similar response from FINMA, the Swiss regulator, two of the people said, but neither institution has decided to become publicly involved yet.
Banks are falling
The sharp falls in stock prices followed the collapse of Silicon Valley bank in the US, and after the head of Saudi National Bank, which bought a 10 per cent stake in Credit Suisse last year, ruled out providing the Swiss lender with more financial help.
What happened to Credit Suisse?
Credit Suisse’s market capitalization has fallen to less than CHF7 billion ($7.6 billion), with the bank raising CHF4 billion in capital just a few months ago. By mid-afternoon Wednesday, shares were down 17 percent. “It seems inevitable that the SNB will step in to provide a lifeline,” said Octavio Marenzi, an analyst at Ubimas. “Realize [البنك الوطني السويسري] It is absolutely the Swiss government that a failure of Credit Suisse or even any losses on the part of deposit holders would destroy Switzerland’s reputation as a global financial centre.”
Banking stocks
Shares of BNP Paribas (EPA:) declined by 9 percent and Societe Generale (EPA:) by 11 percent. Deutsche Bank (ETR:) and Barclays lost 7 per cent, while ING shares fell 8 per cent. The broader equity markets fell, with the pan-European Stoxx 600 down 2.4 per cent. Selling spread to Wall Street as US markets opened, with the S&P 500 down 1.8 percent in early trading led by banks. Citigroup (NYSE:) shares fell 5 percent and JPMorgan (NYSE:) lost 4.6 percent.
Small US banks who were in the midst of selling earlier this week fell sharply. First Republic Bank fell 13 percent, while Bacoist fell 14 percent. Banks in the Stoxx 600 have now lost 16 per cent over the past week in a rout sparked by the failure of SVB after the California lender was forced to take huge losses on its bond portfolio.
Investors said Credit Suisse’s troubles were a reminder that European banks also have large holdings of bonds that have been hit by rising interest rates. “Credit Suisse is an isolated case, but banks in Europe, due to regulatory pressure, have been forced to load negative-yielding bonds at the worst of times, and are now facing large unrealized losses on the balance sheet and wondering whether they will be able to afford it,” said Charles-Henri Monschau, chief investment officer at Seiz Banc. Market whether Europe can see the same problem as we.”
Bond markets rallied as investors ramped up their bets on interest rate cuts from the Federal Reserve later this year. Markets now expect, at most, a quarter point interest rate hike from the US central bank by May, followed by cuts of up to 1.25 percentage points by December. Before the SVB collapse, investors expected a half-point increase later this month, and rates to remain elevated for the remainder of 2023.
Credit Suisse..the crisis is old
Credit Suisse revealed on Tuesday that its auditor, PwC, had identified “material weaknesses” in its financial reporting controls, which led to a delay in publishing its annual report last week after the SEC wanted more clarity on the flaws. Spreads on the bank’s five-year credit default swaps, which signal to the downside for an investor, widened to 565 basis points on Wednesday from 350 basis points at the start of the month. Asked on Bloomberg TV whether the Saudi National Bank would be open to offering capital to Credit Suisse if there was a call for additional funding, SNB President Ammar Al-Khudairi said: “The answer is not at all, for many reasons outside the simplest reason.” It is regulatory and legal.” Owning more than 10 percent of Credit Suisse would bring additional regulatory requirements, he said. In statements to reporters during the event, he added that he is happy with the bank’s restructuring plan and does not feel the need for more capital.
