Credit Suisse asks Swiss National Bank for support after shares plunge

Swiss credit has asked the Swiss National Bank (SNB) a public show of support, reported Wednesday the Financial Timesafter the bank’s shares plunged as much as 30% and triggered a widespread fall in European and US bank stocks.

Credit Suisse has asked Swiss regulator Finma for a similar move, according to the report, citing two people familiar with the matter.

The SNB declined to comment in response to a question from Reuters.

Credit Suisse shares fell as much as 30% on Wednesday despite attempts by the head of Switzerland’s second-largest bank to reassure investors in a feverish market as the banking sector falters. The share of the entity, considered as the weak point of the banking network in Switzerland, reached a record low at 1.55 Swiss francs.

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On president, Axel Lehmann, assured however that the bank does not need government help. “It’s not an issue,” given that the entity has “solid financial ratios,” Lehman said at a conference for the banking sector in Saudi Arabia.

But his statements failed to calm the markets.

The Credit Suisse collapse comes after the bankruptcy of the Californian bank Silicon Valley Bank (SVB) due to a wave of massive withdrawals from its clients that left the establishment in difficulties to get out on its own.

It seems that more and more investors are looking at Credit Suisse as the next most likely domino to fall,” said Neil Wilson, an analyst at Finalto.

But if Credit Suisse has to deal with “existential problems,” they are other kinds of difficulties, in his view. “It’s really too big to go bankrupt,” she said.

Unlike SVB, the Swiss establishment is one of the thirty international banks considered too big to be allowed to fail, which also imposes stricter regulations to withstand strong shocks.

setbacks accumulation

The collapse of the Swiss bank’s shares accelerated after the refusal of its main shareholder, the Saudi National Bankto increase its participation in the capital.

Asked by Bloomberg TV whether the Saudi bank could invest more money, its president, Amar Al Judairy, said: “The answer is absolutely no, for several increasingly simple reasons, which are regulatory and statutory,” he declared.

The Saudis currently own 9.8% of the Swiss bank. “If we go above 10%, a series of new rules come into effect,” he explained.

The Saudis became CS’s first shareholders during a November capital increase launched to finance a major restructuring of the entity.

Swiss law provides that natural or legal persons who directly or indirectly hold at least 10% of the capital or voting rights in a bank must give “the guarantee that their influence is not likely to be exercised to the detriment of a prudent and healthy management” of the establishment.

Overcoming this 10% link in the second largest Swiss bank could cause a stir in the country, at a time when its shareholders have already seen their participation reduced after the capital increase and are witnessing the collapse of its value.

The bank has been in trouble for two years after the bankruptcy of British financial firm Greensill, which marked the start of a series of scandals that weakened the bank.

Since March 2021, the stock has lost more than 83% of its value.

Some shareholders ended up throwing in the towel, such as the US investment company Harris Associates, one of its most important backers, which revealed last week that it had sold all of its stake.

“The pressure on Credit Suisse has reached an already very nervous market,” Jane Foley, an analyst at Rabobank, told AFP.