Key events
Closing post
Phew, what a day, with financial markets gripped by fears over the banking sector as Britain’s chancellor outlined his budget.
The big news tonight is that Swiss regulators said Credit Suisse can access liquidity from the central bank if needed, as they race to assuage fears around the lender after it led a rout in European bank shares on Wednesday.
In a joint statement, the Swiss financial regulator FINMA and the nation’s central bank said that Credit Suisse “meets the capital and liquidity requirements imposed on systemically important banks.”
Governments and at least one bank were putting pressure on Switzerland to act, according to reports, as London’s stock market posted its biggest one-day loss in a year.
Here are today’s main stories, first on the Credit Suisse crisis:
And on the budget:
And in other news:
The 30% slump in Credit Suisse’s shares at one point today took them down to a level that is either “ridiculously cheap or a prelude to full-blown crisis”, our financial editor Nils Pratley writes.
The former pride of Swiss banking, an institution founded 1856, was valued at a mere 7bn Swiss francs at its lowest point. By way of irrelevant comparison, the national chocolate champion, Nestlé, is worth almost 300bn Swiss francs.
For “don’t panic” optimists, this is just a case of jittery investors unfairly playing games of whack-a-mole after the collapse of Silicon Valley Bank in the US last week. There are no direct links between the two institutions but the market is hard-wired to hunt for the next victim. It is easy to hit Credit Suisse, a bank that everybody already regarded as the weakling among big financial institutions in Europe.
Attempting to persuade investors to look at fundamentals, the bank’s chairman, Axel Lehmann, appealed for patience. “We have strong capital ratios, a strong balance sheet,” he said. “We already took the medicine.” That last comment was presumably a reference to a 4bn Swiss franc capital-raise last year.
The bearish case is that the outside financial weather can’t be so easily ignored. The SVB blow-up, like last autumn’s crisis with UK pension funds’ LDI (liability-driven investment) strategies, has its deep roots in the rise in interest rates, which in turn has created unrealised losses on bond portfolios. One of SVB’s problems (aside from basic risk-management cock-ups) was that it had to crystallise a chunk of those losses when depositors fled. It is not unreasonable for the market to wonder where else bond pressures may blow a few holes.
Here’s the full piece:
On Wall Street, the closing bell has rung, with stocks in the red as fears over the banking sector weighed on New York.
The Dow Jones industrial average, of 30 large US companies, ended the day down 280 points, or 0.87%, at 31,875 points.
The broader S&P 500 index lost 0.7%, while the tech-focused Nasdaq closed very slightly higher.
Wall Street recovered some of its earlier losses, after it was reported that Swiss officials were holding talks about the situation at Credit Suisse (see earlier post).
The statement tonight from the Swiss authorities adds that Credit Suisse shares, and bond prices, have been hit by ‘market reactions’ in recent days.
In a section titled “Credit Suisse meets regulatory capital and liquidity requirements,” FINMA and the Swiss National Bank say:
Credit Suisse’s stock exchange value and the value of its debt securities have been particularly affected by market reactions in recent days.
FINMA is in very close contact with the bank and has access to all information relevant to supervisory law. Against this background, FINMA confirms that Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks.
In addition, the SNB will provide liquidity to the globally active bank if necessary. FINMA and the SNB are following developments very closely and are in close contact with the Federal Department of Finance to ensure financial stability.
SNB to provide Credit Suisse with liquidity if needed
Newsflash: The Swiss National Bank has pledged to provide Credit Suisse with liquidity, if needed.
The Swiss Financial Market Supervisory Authority FINMA and the Swiss National Bank have asserted that “the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets”.
In a joint statement, after a day of chaos in the financial markets, FINMA and the SNB say:
The strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability.
Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide CS with liquidity.
FINMA and the SNB add that there are “no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market”.
And they state that “Credit Suisse meets regulatory capital and liquidity requirements”, saying:
Regulation in Switzerland requires all banks to maintain capital and liquidity buffers that meet or exceed the minimum requirements of the Basel standards.
Furthermore, systemically important banks have to meet higher capital and liquidity requirements. This allows negative effects of major crises and shocks to be absorbed.
Full story: Swiss government ‘holds talks on options to stabilize Credit Suisse’
Swiss authorities and Credit Suisse Group AG are discussing ways to stabilize the bank, Bloomberg reported on Wednesday, citing people familiar with the matter.
Credit Suisse leaders and government officials have talked about options that range from a public statement of support to a potential liquidity backstop, the report said.
Other suggested potential moves for Credit Suisse could be a potential separation of their Swiss unit and a tie-up with their larger Swiss competitor, UBS Group AG, the report said, adding that it’s unclear which, if any of these steps will actually be executed.
Switzerland is under pressure from at least one major government to intervene quickly on Credit Suisse, a source familiar with the situation told Reuters, after the Swiss bank led a rout of European bank stocks on Wednesday.
Swiss authorities and Credit Suisse are discussing ways to stabilize the bank, according to people familiar with the matter, Bloomberg reports.
Switzerland’s financial regulator, Finma, could make a statement “soon”, they add.
*SWITZERLAND HOLDS TALKS ON OPTIONS TO STABILIZE CREDIT SUISSE
*SWISS OPTIONS FOR CS INCLUDE STATEMENT OF SUPPORT, BACKSTOP
*SWISS REGULATOR FINMA SAID TO LIKELY MAKE CS STATEMENT SOON
– BLOOMBERG
— Anthony DeRosa (@Anthony) March 15, 2023
Switzerland is facing pressure from at least one major government to intervene on Credit Suisse in the coming hours given the systemic nature of the bank, a source familiar with the situation has told Reuters.
The U.S. Treasury said it is monitoring the situation surrounding Credit Suisse and is in touch with global counterparts about it, a Treasury spokesperson said on Wednesday as the bank came under renewed market pressures.
Heavy losses across Europe as banks tank
There were heavy losses across European stock markets today too, as bank shares were pummelled.
Germany’s DAX lost 3.27%, France’s CAC fell 3.6% and Italy’s FTSE MIB index tumbled by 4.6%.
While Credit Suisse was the worst-performing bank, down 24%, other financial institutions suffered heavy falls too. French bank Société Générale tumbled 12%, rival BNP Paribas lost 10%.
Deutsche Bank fell 9%, and Commerzbank fell 8.7%.
“Concerns over another 2008-style financial crises have intensified,” warned Fawad Razaqzada, Market Analyst at City Index, “fresh on the heels of a broader industry selloff following the collapse of Silicon Valley Bank.”
Razaqzada added:
The selling of financial stocks was triggered by Credit Suisse, which has seen its shares hit repeated all-time lows in recent weeks.
The lender’s biggest shareholder, Saudi National Bank, announced it could not raise its stake more than 10% in the beleaguered Swiss bank because of regulatory issues. Concerned by another bank failure, traders sold shares of European banks heavily.
It’s been another remarkable day in financial markets and it, unfortunately, doesn’t feel like the worst is behind us.
So says Craig Erlam, senior market analyst at OANDA, who adds:
Fear has once again gripped the markets, concerned about a repeat of past crises – one in particular, for obvious reasons – and the implications for the financial system and the global economy. Of course, this is natural when so little is known about the situation and what it ultimately means for the health of the rest of the system.
The lack of input from Switzerland’s central bank and regulator over the situation at Credit Suisse have only fuelled fears, Erlam adds:
We’re now left in a situation in which stock markets have tumbled, banks around the world have been pummeled and everyone is wondering just how bad the situation is going to get. The bill may be coming due for more than a decade of rock-bottom interest rates and a massive quantitative easing experiment.
£75bn wiped off UK blue-chip stocks
Today’s selloff has wiped £75bn off the value of the FTSE 100 index, we calculate.
US Treasury monitoring Credit Suisse situation
The US Treasury Department is monitoring the Credit Suisse situation, a spokesperson said Wednesday.
The Treasury is in touch with its global counterparts, the spokesperson said, speaking after Credit Suisse’s stock fell to record lows today after its biggest shareholder ruled out boosting its stake.
Shares in Credit Suisse have ended the day at a record closing low, down 24% at 1.69 Swiss francs.