Switzerland’s second largest bank… Twice the assets of bankrupt SVB
ECB Officials Query European Banks for CS Exposures
(New York = Yonhap Infomax) Correspondent Yoon Young-sook = European banking stocks are shaken by the plunge in shares of Credit Suisse (CS), the second largest bank in Switzerland.
Concerns about the banking sector, which began in the United States, appear to be spreading to Europe.
According to the Wall Street Journal on the 15th (local time), CS’ stock price fell more than 25% in the European market, breaking a record low.
Shares of France’s Societe General (SG) and BNP Paribas both fell more than 10%, and shares of Germany’s Deutsche Bank also fell more than 8%.
ABN Amro’s head of research at Joost Beaumont Bank said the decline in CS’s bond price and stock price meant that investors “decided that the bank needed to be bailed out.”
“If the authorities don’t properly handle the CS crisis, it will have shockwaves across the entire sector,” he warned. “To make matters worse, both the US and Europe could have banking problems.”
The news that the CS situation is deteriorating is spreading to the bank sector as a whole after the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank in the United States.
CS bond prices also fell sharply. 2027 corporate bond prices fell to 55 cents per dollar. It was 72 cents the day before and 90 cents earlier this month.
CS has been identified as a trouble bank in Europe after years of repeated scandals and massive losses.
The situation worsened when Saudi National Bank (SNB), which owns a 9.9% stake in CS, said in an interview with a broadcasting station that day that it had no plans to make additional investments in CS for regulatory reasons.
Axel Lehmann, chairman of CS, said at a conference that day that banks’ capital and balance sheets are very strong, and dismissed the possibility of government support as “not even a topic to talk about.”
However, concerns about the bank have seldom subsided.
The bank had previously said it had found “significant weaknesses” in its accounting reporting process, which severely damaged confidence in the company.
CS is the second largest bank in Switzerland after UBS and is a global bank that is actively doing business in Europe, Asia and the United States. As of the end of last year, its assets stood at $580 billion, more than twice the size of Silicon Valley Bank, which went bankrupt last week.
CS is a bank classified as a ‘systematically important financial institution’ (SIFI), designated to oversee the soundness of large banks after the 2008 financial crisis. If designated as the relevant institution, the capital ratio must be raised above a certain level, and a specific plan for orderly dismantling must be prepared in case of problems.
According to a report by the Swiss National Bank (SNB), as of the end of 2021, about 70% of CS’s balance sheet is offshore, and CS holds 13% of all Swiss onshore loans and 14% of all onshore deposits.
Therefore, if there is a problem with CS, it is expected to act as a significant burden on the Swiss economy, which is highly dependent on finance. Assets in the Swiss banking sector accounted for 500% of GDP in 2020. This is almost five times the level of the United States.
CS’ US operations are overseen by the Federal Reserve and other financial authorities.
On this day, European Central Bank (ECB) officials are known to have started to check the exposure (risk exposure amount) of European banks to CS.
The WSJ reported that ECB officials contacted banks supervised by the central bank to inquire about their financial exposure to CS, citing sources on the same day.
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This article was serviced at 00:08, 2 hours earlier on the Infomax financial information terminal.
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