The Swiss financial authorities tried last night to calm the markets by offering support to the Credit Suisse bank, affected by the crisis.
The firm had pleaded with the Swiss National Bank to intervene after a massive drop in its share price set off alarm bells around the world and engaged Bank of England officials in emergency talks with their counterparts across the system. global financial.
Credit Suisse shares fell as much as 30 percent yesterday before closing down 24 percent, prompting an emergency trading halt on the Swiss stock exchange.
The collapse came as the chairman of Credit Suisse’s biggest backer, the Saudi National Bank, ruled out providing more cash to the company due to regulatory issues.
But in a dramatic intervention last night, the Swiss National Bank said: ‘Credit Suisse complies with the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide liquidity to CS.’
Swiss financial authorities had pleaded with the Swiss National Bank to intervene after a massive drop in its share price set off alarm bells around the world.
Pictured: A trader works on the floor of the New York Stock Exchange on March 15, 2023.
Credit Suisse said today that it was taking “decisive steps” to strengthen its liquidity by exercising its option to borrow from the Swiss National Bank up to $54 billion.
Meanwhile, Bank of England officials were assessing the impact of a possible Credit Suisse collapse last night, the Telegraph reported.
It comes as the London Stock Exchange’s FTSE 100 index also suffered its worst day since Russia’s invasion of Ukraine last year, falling 3.8 percent.
The drop marked the largest single-day drop in percentage terms since February 24, 2022.
A 292.66 point drop in the blue chip index from 7,344.45 was also its biggest loss since the start of the Covid pandemic in March 2020, The Times reports.
Credit Suisse, the second largest bank in Switzerland, has a large presence in London and employs more than 5,000 people.
Yesterday’s panic followed an admission by Credit Suisse on Tuesday that “material weaknesses” had been identified in its financial reporting controls.
The 167-year-old Zurich-based bank has been plagued by the crisis for several months as it seeks to recover from a series of scandals that have shaken investor and customer confidence and caused billions to be withdrawn.
These have been compounded by last week’s collapse of US group Silicon Valley Bank (SVB), the biggest bank failure since the 2008 financial crisis, which raised broader concerns about the stability of the entire financial sector.
But while SVB focused on a niche area of the economy, mainly tech start-ups, a failure at Credit Suisse could have far-reaching effects given its size and deep ties to the banking system.
In a stern warning, economist Nouriel Roubini, nicknamed Dr Doom, said the collapse of Credit Suisse would be a “Lehman moment”, a reference to the major US investment bank Lehman Brothers which failed in August 2007 at the start of the crisis. world financial. crisis.
Credit Suisse shares fell as much as 30 percent yesterday before ending down 24 percent, prompting an emergency trading halt on the Swiss stock exchange.
Last night’s statement from the Swiss National Bank said that ‘the problems of certain banks in the US do not represent a direct contagion risk for the Swiss financial markets’.
Credit Suisse’s woes quickly spread to other big European banks, with France’s BNP Paribas and Societe Generale plunging more than 10 percent.
Meanwhile, Germany’s Deutsche Bank slumped more than 9 percent, while rival Commerzbank fell 8.8 percent. Swiss bank UBS also fell nearly 9 percent.
In the UK, Barclays shares fell 9 percent, Lloyds fell more than 4 percent, NatWest fell 6 percent, HSBC fell 5 percent and Standard Chartered slid 7.7 percent.
Panic also crossed the Atlantic, hitting US bank stocks as JP Morgan fell 5.5 percent, Morgan Stanley fell 6.7 percent, Goldman Sachs lost 5.2 percent and Bank of America fell a 3 percent.
Pictured: London (archive photo). In the UK, Barclays shares fell 9 percent, Lloyds fell more than 4 percent, NatWest fell 6 percent, HSBC fell 5 percent and Standard Chartered fell 7.7 percent.
Susannah Streeter, of financial services firm Hargreaves Lansdown, said: “The new bank liquidation has taken hold as fears are raised over the health of the sector with the shadow of SVB’s collapse still looming.” Nervousness is super high and that has become a disaster in Europe.
Larry Fink, head of the world’s largest asset manager BlackRock, warned that the US financial system was facing a “slow-onset crisis” in the wake of SVB’s collapse and that “more seizures and closures” were ahead. “.
In a letter to the company’s investors, Fink compared the current turmoil to the savings and loan crisis of the 1980s, when more than 1,000 lenders collapsed.
He added that recent interest rate hikes were “the first domino to fall” and predicted that banks would tighten lending requirements as a result of the uncertainty.
The panic gripping the global banking sector comes as investors fear financial institutions are racking up big losses after investing in government debt during the pandemic. The SVB itself had invested heavily in US government debt, which, while generally safe investments, saw its value fall as interest rates rose.
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