The Credit Suisse banking group collapsed on the stock market after statements by its main shareholder, who said he had no intention of bringing fresh money to the Swiss bank if necessary. But the difficulties of Credit Suisse, which has been accumulating setbacks for several months, are not new.
• What is Credit Suisse?
Credit Suisse is a Swiss banking group headquartered in Zurich. Number two in the Swiss banking sector behind its great rival UBS, and one of the largest European banks, Credit Suisse specializes in wealth management and investment banking. The group, which employs 45,000 people worldwide, had 1,294 million Swiss francs (1,331.4 billion euros) in assets under management at the end of 2022.
• What’s happening today?
Credit Suisse, already in trouble for some time, has had bad news since the beginning of March: loss of one of its long-term shareholders, postponement of the publication of its results, departure of one of its top compliance officers, publication of a report annual report acknowledging “substantial weaknesses” in its internal controls, not to mention a stock low. The bankruptcy of the US bank SVB added a bit more uncertainty.
The interview granted this Wednesday to Bloomberg of the president of the Saudi National Bank (SNB), Ammar al-Khudairy, was the straw that broke the camel’s back. Because he is the largest shareholder in Credit Suisse since a capital increase last November. Ammar al-Khudairy that the SNB was “absolutely not” going to support the Swiss bank by increasing its capital. Specifically: if Credit Suisse needs money in case of a problem, its main shareholder is not going to give it to them.
• Why have we been worried for so long?
Concerns about Credit Suisse, considered the weak link in the Swiss banking system, are not new. After the bankruptcy of the British financial company Greensill in March 2021, a succession of scandals has weakened the group. Its stock lost more than 80% of its value and the American investment company Harris Associates, long its largest shareholder, even ended up throwing in the towel by selling its entire stake in the bank.
“All the indicators are red,” confirms François Chaulet, president of Montségur Finance, at BFM Business. Its revenue is plummeting: Credit Suisse lost 7.3 billion Swiss francs (7.51 billion euros) in 2022, due to massive withdrawals from its clients, after already posting heavy losses the previous year. A comprehensive restructuring plan was presented last October that includes the elimination of 9,000 positions by 2025, or more than 17% of its workforce.
• Is it panic in the stock market?
The statements of the main shareholder caused a wind of panic in the markets. Credit Suisse stock tumbled on Wednesday, sending major European banks into sharp declines. The markets fear in particular a “run on the bank” by the great fortunes that have placed their assets in Credit Suisse. Credit Suisse is a systemic bank, that is, a bank whose failure would have serious consequences for the financial system due to its size and its activities.
• What risk for European banks?
Credit Suisse’s situation is not encouraging but, since the 2008 financial crisis, regulators “have requested a lot of excess capital from the various European banks,” stresses Amandine Gérard, president of Financière de l’Arc, in BFM Business. “Banks like BNP Paribas or Societe Generale” are highly capitalized,” she says. Also, unlike SVB, Credit Suisse’s poor health is not unexpected news.
The main problem lies in the interbank system (more specifically, when banks lend money to each other). “If there starts to be mistrust, we find ourselves with a liquidity problem,” explains Amandine Gérard. The reaction of the European Central Bank (ECB), which will hold a meeting this Thursday, and its president Christine Lagarde is eagerly awaited. Markets are also keeping an eye on the Swiss central bank (BNF), on which Credit Suisse depends.
Source: BFM TV
