The Swiss authorities agreed to save from possible bankruptcy and provide emergency financial assistance to one of the largest banks in the confederation. Credit Suisse will receive 50 billion Swiss francs ($54 billion) to support the bank's liquidity and reassure investors as the company's shares collapse to an absolute minimum in the history of the 167-year-old bank, Reuters reported .
In the past few weeks, Swiss bank shares have been bottoming out, setting new all-time lows. Even the comments of the bank's top management about the quality of reserves and assets, which were supposed to help get through difficult times, including an outflow of customers and a collapse in revenue, did not help. Only the Central Bank of Switzerland, which agreed to provide a credit line to one of the largest banks in the country, helped to stop the fall in the value of shares in order to prevent a collapse and a possible domino effect.
Since the beginning of the year, the bank's capitalization has fallen by more than 83%, and the share price has dipped from about $10.5 in early January to $1.75 during trading on Wednesday, March 15. However, after the announcement of financial assistance from the Swiss regulator, the shares rose in price and are currently trading at $2.36 per share. The report of the credit institution says that the bank has met all the requirements of the regulator for liquidity and asset quality, and this keeps it access to credit lines of the Central Bank. The bank also intends to reduce its loan commitments by buying back about CHF 3 billion worth of its own bonds from the market.
The agency recalls that the rescue of Credit Suisse was the first in respect of a major Western bank since the 2008 financial crisis. However, not everyone supports the decision of the authorities to help the bank. Some experts point out that supporting such large financial institutions with the help of pumping liquidity only accelerates inflation and does not help solve the problems caused by rising prices. Finally, large banks, knowing that they will not be allowed to fail, take advantage of their position and pursue too risky financial policies.
Credit Suisse had problems at the beginning of 2022. The investment division and the wealth management department showed weak results. The bank faced an outflow of customers for some time, simultaneously demonstrating negative results, while the high debt of the bank did not allow the company to stabilize its financial position for a long time. In the spring of 2023, the situation escalated against the backdrop of a sudden banking crisis in the United States, where medium-sized banks faced problems: Signature bank and Silvergate bank, associated with the crypto industry, as well as the main bank of American startups, Sillicon Valley bank.
Problems with large banks caused a panic in the stock market and accelerated the sell-off at the end of last week and the beginning of this week, and the problems of American banks spread to European ones. Leading financial organizations at the moment fell in price by 20-30% during trading, but after the speech of the American and European authorities, they stopped their fall and began to recover.