Late in afternoon yesterday, Credit Suisse has finally applied for state aid after the crash and despite initial statements from its chairman, in a frightening development with the ECB already underway to ensure there is no spillover to the Eurosystem. The bank sought a reassuring statement from the Swiss National Bank, but also from Finma, the Swiss regulator.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide liquidity,” the central bank and the Swiss supervisory authority (FINMA) said in a joint statement.
Credit Suisse’s stock fall by as much as 30%. Later yesterday the stock had recovered, although compared to Tuesday it was -16%, at 1.87 Swiss francs. To date, with less than three months to go, the stock has lost a third of its value at the start of 2023, and in the last 12 months it has lost 70% of its value.
Meanwhile Switzerland’s 10-year bond rose 22 basis points to 0.97%. Similar increases were recorded in other European bonds, such as French, German, Spanish and Portuguese.
Why is this happening?
Relatively small regional US banks (Silicon Valley Bank, First Republic Capital etc.-please read also the analysis titled “US Regional Bank Shares Fall: All Eyes on FRC“) are going for closure. In a corresponding manner, the same is done in the small regional European banks. The vehicle for this process in Europe is with Credit Suisse AG. Essentially what is being done in a “violent” way is the merger of the banking industry on both sides of the Atlantic. The goal is to leave only a few dozen strong banks on both sides of the Atlantic with a strong capital base that can compete on a global level with the Chinese banks that have the support of the Chinese state.
This forced merger of the banking industries is achieved because money becomes expensive with
the policy of increased interest rates. Essentially, the markets are running dry of money, so the result is the bankruptcy of some banks and companies and in the near future recession in the economy.
The Chronicle of the Collapse of Credit Suisse AG
Credit Suisse Group AG’s admission just 24 hours ago of “material weaknesses” in its financial statements, as the cost of insuring its bonds against default reached its highest level since the bank’s inception, opened the bag of Aeolus for the European bank industry, against the background of the collapse of Silicon Valley Bank.
The “material weaknesses” identified relate to the inability to design and maintain effective risk assessments in its financial statements.
In its annual report, Credit Suisse revealed that it had identified “certain material weaknesses in internal control over financial reporting” for the years 2021 and 2022. “The group’s internal control over financial reporting was not effective,” Credit Suisse said in the its annual report, with management concluding that disclosure controls and procedures were not effective.” Specifically, the bank announced that it was observing “significantly higher withdrawals of cash deposits, non-renewal of maturing time deposits and net outflows of assets at levels that significantly exceeded the rates recorded in the third quarter of 2022.” According to estimates, in the last quarter of 2022 there were deposit outflows of 110 billion Swiss francs.
Credit Suisse’s financial results for 2022 showed a net loss of 7.3 billion Swiss francs ($8 billion) for the full year.
Additionally, PwC, a firm of certified public accountants that audited the financial statements for the year ended December 31, 2022, issued an “adverse opinion on the effectiveness of the Group’s internal control over financial reporting as of December 31, 2022,” the company said. Credit Suisse.
The report was the first shock to investors and markets, with Credit Suisse announcing that it was adopting a “Recovery Plan”. However, the Saudi National Bank (SNB), which owns 9.9% of Credit Suisse’s shares and is the main shareholder of the Swiss bank, refuses to proceed with a new capital increase as, according to Bloomberg, it is related to the reluctance of the SNB to exceed the 10% limit. Note that the SNB is 37% controlled by Saudi Arabia’s sovereign wealth fund.
Anxiety and fears about the path of the banking sector in Europe – regardless of the SVB issue unrelated to SC developments – are back for good, with bank shares in freefall today. Stock market authorities were forced to suspend trading in the shares of both Credit Suisse and Societe Generale, which was also under heavy pressure. The shares of several Italian banks (UniCredit, Finecobank and Monte Dei Paschi) also went on hold.
Late in afternoon yesterday, Credit Suisse has finally applied for state aid after the crash and despite initial statements from its chairman, in a frightening development with the ECB already underway to ensure there is no spillover to the Eurosystem.
The bank sought a reassuring statement from the Swiss National Bank, but also from Finma, the Swiss regulator.
For now, neither authority has decided to intervene in favor of the bank’s request, which has seen its stock fall by as much as 30%. Later in the day the stock had recovered, although compared to yesterday it was -16%, at 1.87 Swiss francs.
To date, with less than three months to go, the stock has lost a third of its value at the start of 2023, and in the last 12 months it has lost 70% of its value.
Meanwhile Switzerland’s 10-year bond rose 22 basis points to 0.97%. Similar increases were recorded in other European bonds, such as French, German, Spanish and Portuguese.
