Switzerland's central bank and financial regulator said Credit Suisse will receive a liquidity backstop if needed, a show of support aimed at restoring confidence in the troubled lender after its shares slumped by a record amount.
"Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks," the Swiss National Bank and regulator Finma said in a
Shares in Credit Suisse slumped by as much as 30% on Wednesday and its bonds fell to levels that signal deep financial distress, as persistent doubts over the scandal-ridden lender combined with a global sell-off in banking stocks. The government, central bank and Finma have been in contact to discuss ways to stabilize the bank after a tumultuous day sparked by the firm's largest investor ruling out increasing its stake, Bloomberg reported earlier.
The options discussed range from the public show of support and liquidity backstop just announced to more structural remedies, including a separation of the Swiss unit and a tie-up with larger Swiss rival UBS. The Swiss central bank (SNB) offers funding to banks against collateral as a matter of course, while the government has been working on legislation that would make public funds available for banks being wound down. The joint statement didn't specify the terms of the SNB liquidity.
Credit Suisse's American depositary receipts pared losses after the announcement by Swiss authorities. The price was down 14% at the close of regular trading in New York after falling more than twice as much earlier in the session.
"We welcome the statement of support," Credit Suisse wrote on Twitter.
The crisis accelerated Wednesday after the Saudi National Bank ruled out increasing its stake because of regulatory constraints. The plunge helped drag all European lenders lower as investors were quick to move away from banking risk after turmoil induced by the collapse of Silicon Valley Bank.
Close contact
"There are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the U.S. banking market," Finma and the SNB said in the statement. "Finma and the SNB are following developments very closely and are in close contact with the Federal Department of Finance to ensure financial stability."
Credit Suisse CEO Ulrich Koerner on Tuesday asked for patience and said the bank's financial position is sound. He pointed to the firm's liquidity coverage ratio, which indicates the bank can handle more than a month's worth of outflows in a period of stress. Chairman Axel Lehmann had said at a conference on Wednesday that government assistance "isn't a topic" and the firm's efforts to return to profitability aren't comparable to the severe liquidity issues hitting smaller lenders in the U.S.
Switzerland's second-largest lender, which traces its roots back to 1856, has been pummeled over the last several years by a series of blowups, scandals, leadership changes and legal issues. The company's 7.3 billion franc ($7.9 billion) loss last year wiped out the previous decade's worth of profits, and the bank's second strategy pivot in as many years has so far failed to win over investors or halt client outflows.
(Updates with American depositary receipts, bank's response from fifth paragraph.)
—With assistance from David Scheer.
