Credit Suisse begged financial authorities to intervene after sparking turmoil

The Swiss financial authorities tried to calm the markets last night by offering support to the crisis-hit bank Credit Suisse.

The company had begged the Swiss National Bank to intervene after a massive plunge in its stock price set alarm bells ringing worldwide – and involved Bank of England officials in emergency talks with counterparts in the global financial system.

Shares of Credit Suisse fell as much as 30 percent yesterday before ending at 24 percent, triggering an emergency freeze on the Swiss stock exchange. The crash came as the chairman of Credit Suisse’s largest lender, Saudi National Bank, ruled out providing more money to the company over regulatory concerns.

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 CS with liquidity.’

Bank of England officials assessed the impact of a potential Credit Suisse collapse last night, the Telegraph reported.

Pictured: A trader works on the floor of the New York Stock Exchange on March 15, 2023

Yesterday’s panic followed an admission by Credit Suisse on Tuesday that it had identified “material weaknesses” in its financial reporting controls.

The 167-year-old Zurich-based bank has been in the throes of crisis for several months as it tries to recover from a series of scandals that have damaged the confidence of its investors and customers and led to billions being withdrawn from it.

These have been exacerbated by the collapse of US group Silicon Valley Bank (SVB) last week – the largest bank failure since the 2008 financial crisis, sparking wider concerns about the stability of the entire financial sector. But while SVB focused on a niche area of ​​the economy – primarily tech startups – a failure at Credit Suisse could have far-reaching consequences due to its size and deep ties to the banking system.

In a stark warning, economist Nouriel Roubini, nicknamed Dr. Doom, that a Credit Suisse collapse would be a “Lehman moment” – a reference to the major US investment bank Lehman Brothers which went bankrupt in August 2007 at the start of the global financial crisis. crisis.

Credit Suisse shares fell as much as 30 percent yesterday before ending at 24 percent, triggering an emergency freeze on the Swiss stock exchange

Last night’s statement from the Swiss National Bank said: “The problems of certain banks in the US do not pose a direct threat of contagion to Swiss financial markets.”

Credit Suisse’s woes quickly spread to other major European banks, losing France’s BNP Paribas and Société Générale by more than 10 percent.

Meanwhile, Germany’s Deutsche Bank fell more than 9 percent while competitor Commerzbank fell 8.8 percent. Fellow Swiss bank UBS also fell almost 9 percent.

In the UK, shares of Barclays fell 9 percent, Lloyds more than 4 percent, NatWest 6 percent, HSBC 5 percent and Standard Chartered 7.7 percent.

Panic also crossed the Atlantic to hit stocks in US banks: JP Morgan lost 5.5 percent, Morgan Stanley fell 6.7 percent, Goldman Sachs lost 5.2 percent and Bank of America fell 3 percent.

Pictured: London (file photo). In the UK, shares of Barclays fell 9 percent, Lloyds more than 4 percent, NatWest 6 percent, HSBC 5 percent and Standard Chartered 7.7 percent.

Susannah Streeter, from the financial services company Hargreaves Lansdown, said: ‘The new banking sell-off has held up as fears are surfacing about the robustness of the sector with the shadow of the collapse of the SVB still looming. The nervousness is super high and that has spilled over into a hot mess in Europe.’

Larry Fink, head of the world’s largest asset manager BlackRock, warned that the US financial system was facing a “slowly advancing crisis” following the collapse of the SVB and that “more repossessions and closures” were on the way.

In a letter to the company’s investors, Mr. Fink compared the current turmoil to the savings and credit 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 credit requirements due to the uncertainty.

The panic gripping the global banking sector comes as investors fear financial institutions will suffer huge losses from investing in sovereign debt during the pandemic. The SVB itself had invested heavily in US government bonds, which, while generally safe investments, fell in value as interest rates rose.

It came as the London Stock Exchange’s FTSE 100 index was experiencing its worst day since the Russian invasion of Ukraine last February.