Credit Suisse Stock Plummets 30%... Authorities Step In to Assure "Capital and Liquidity Adequacy"

Sharp Stock Price Drop Prompts "Liquidity Support If Needed" Clarification
Swiss National Bank and Financial Supervisory Authority Joint Statement

Swiss financial authorities have unveiled a liquidity support plan for the global investment bank Credit Suisse (CS). This move comes amid growing concerns that the collapse of the U.S. Silicon Valley Bank (SVB) could spread to Credit Suisse, which has long been known as the "problem child" of the European financial sector due to years of continuous investment losses and worsening financial difficulties.

On the 15th (local time), the Swiss National Bank (SNB) and the Financial Market Supervisory Authority (FINMA) issued a joint statement referencing the recent SVB bankruptcy, stating, "We want to clarify that the issues of a specific U.S. bank do not pose a direct risk to the Swiss financial market." They added, "There are no signs that the turmoil in the U.S. banking market will spread to the Swiss financial sector," and affirmed, "Credit Suisse meets the bank's capital and liquidity requirements."

The two institutions noted, "The value of Credit Suisse's stock and debt instruments has been affected by market reactions over the past few days due to the SVB incident," but emphasized, "Regulators are closely sharing all information with the bank and have confirmed that Credit Suisse meets capital and liquidity requirements."

Furthermore, they stressed, "If necessary, we will provide liquidity to the bank," and highlighted, "We are in close contact with the Federal Department of Finance to ensure the stability of the Swiss financial system."

Major foreign media outlets such as The Wall Street Journal (WSJ) reported that as concerns arose over whether Credit Suisse might not overcome this critical moment amid the fallout from the SVB collapse, Swiss financial authorities might soon announce rescue measures to dispel such worries. Thomas Matter, a member of the Swiss Federal Assembly, said, "It would not be surprising if the Swiss National Bank makes an announcement related to support for Credit Suisse."

Credit Suisse's stock price recently plunged amid the SVB bankruptcy aftermath. On this day, Credit Suisse shares on the New York Stock Exchange fell as much as 30% intraday compared to the previous close. The one-year credit default swap (CDS), a default risk indicator, also reached 835.9 basis points. This is 18 times that of Swiss rival UBS Group and nine times that of Deutsche Bank. WSJ noted that this "shows investors are preparing for the possibility of default."

[Image source=AFP Yonhap News]

Credit Suisse has been a problem child in the European financial sector for years. Amid a deteriorating business environment due to the COVID-19 pandemic, it suffered consecutive blows from the U.S. Archegos incident and failed investments in the British Greensill Capital, which went bankrupt in March 2021, leading to a performance shock and a declining stock price.

As repeated scandals and investment losses resulted in massive damages and crisis rumors, the bank overhauled its management team, sought self-help measures such as attracting Middle Eastern funds through a stake sale to the Saudi National Bank (SNB), and announced plans to separate its investment banking division and reduce its workforce by as many as 9,000 employees by the end of 2025.

However, financial concerns intensified after the recently released 2022 annual report revealed "significant weaknesses" in internal accounting controls. The report stated, "As of December 31, 2022, the group's internal controls over financial accounting were not effective, and for the same reason, management reached the same conclusion upon reevaluation for the period ending December 31, 2021."

PricewaterhouseCoopers (PwC), which audited Credit Suisse's financial statements, expressed a "negative opinion" on the bank's internal controls over financial accounting but evaluated that the bank "discloses its financial situation honestly in all material respects."

Following the sharp plunge in Credit Suisse's stock price, European bank stocks also fell sharply, shaking major national stock markets. On this day, shares of France's BNP Paribas and Soci?t? G?n?rale both dropped more than 10%, and Germany's Deutsche Bank fell 9%, with WSJ reporting that major European bank stocks were also hit.

The FTSE index on the London Stock Exchange recorded 7,344.45, down 3.83% from the previous close, marking the largest decline since Russia's invasion of Ukraine in February last year. Italy's Milan Stock Exchange FTSE MIB index closed at 25,565.84, down 4.61% from the previous close. Spain's Madrid Stock Exchange IBEX 35 index also fell 4.37% to 8,759.10.

This content was produced with the assistance of AI translation services.