The major Swiss bank Credit Suisse increased concerns about a new banking crisis on Wednesday. The trigger was an interview by Ammar Al Khoudairy with Bloomberg TV. In it, the President of the Saudi National Bank stated that he was under no circumstances willing to put more money into the institute.
Since a capital increase at the end of last year, the institute from the Gulf State has been the largest shareholder in the second largest Swiss bank with a stake of 9.9 percent. The fact that the Arab bank primarily cited regulatory reasons for this did not improve the message. The share of the second largest Swiss bank broke at times by up to 30 percent.
In the evening, the security was around 20 percent in the red. Even before that, after the collapse of the Silicon Valley Bank, the Credit Suisse share price had plummeted because the money house is currently considered the weakest European bank.
Parallel to the fall in the share price, the prices for credit default insurance also rushed upwards. If you want to protect yourself against a default of Credit Suisse debt, you currently have to pay about nine times as much as at Deutsche Bank. "It's pure horror," says those around the Swiss institute.
The reason for the crash is the realization that when in doubt, the Arabs will not stand by as saviors in times of need. "The Saudis have enough money," said a senior Swiss banker the day before. Now this option is officially excluded.
After several scandals, Credit Suisse has been in crisis mode for months, ending 2022 with a loss of more than seven billion Swiss francs. Most recently, the surprisingly high outflow of customer funds had caused unrest.
The renewed fall in the papers of the big bank also weighed on the prices of other European institutes. The shares of Commerzbank, Deutsche Bank and the Swiss UBS also fell by almost ten percent. This is also due to investors' fear of an uncontrolled shock wave in the global financial system.
September 2008 is still all too present for many bankers and investors. At that time, the US regulators let the investment bank Lehman Brothers slide into bankruptcy uncontrollably. They also wanted to set an example: a bank that had speculated badly should not be able to rely on the taxpayer as its saviour.
As a result, however, the financial system slid along the brink of collapse for weeks. In Germany, politicians saved a number of banks from collapsing. The costs of the campaign amount to around 60 billion euros.
At that time, a previously unknown word made an amazing discovery: systemically important. This is based on the realization that some financial companies are so large and interwoven with other market participants that their failure would have unforeseeable consequences, similar to Lehman Brothers.
Regulators worldwide have taken this into account and currently officially classified 40 banks worldwide as systemically important. They classify this group again according to five risk levels. Depending on the classification, the banks must meet special requirements, such as holding more equity.
The list is led by US bank J.P. Morgan, which is the only institute in the highest category. Credit Suisse is currently at level 3, on par with US bank Morgan Stanley and major Spanish bank Santander. This is less due to their absolute size than to their connections to other market participants.
The bank discloses in its own report how strongly it is interwoven with the financial system. She recently named a volume of CHF 161 billion for assets within the financial system and a nominal value of EUR 15 trillion for derivatives. Companies and investors enter into these contracts with a counterparty. If this fails, the consequences are unforeseeable.
In Europe, the slump in the price of the major Swiss bank Credit Suisse is causing considerable upheaval on the stock exchanges. The share values of other financial institutions also gave way. WELT economics expert Dietmar Deffner explains the reasons for the crash and says what the effects are.
Source: WELT/Dietmar Deffner
It is primarily through these connections that a bank's problems continue to become concerns for the entire sector. And which even Credit Suisse Chairman of the Board of Directors Axel Lehmann could not eliminate. State aid is not an issue for the bank, he said at a conference in Saudi Arabia.
"We have strong capital ratios and a strong balance sheet." Nevertheless, rumors made the rounds in Zurich as to who would step in to rescue them if the worst came to the worst. The Swiss state? UBS? Even the Deutsche Bank? There was only one fact in no doubt on Wednesday: the bank would not be dropped. After all, it is systemically important.
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