Credit Suisse Group AG (CSGN.S) began a make-or-break weekend after some rivals were more circumspect in their dealings with the bank and authorities pushed it to consider a combination with Swiss rival UBS AG (UBSG.S).
Anil Joshi, the CFO of Credit Suisse, and his teams will meet over the weekend to discuss strategic options for the bank, according to persons who know the situation, on Friday.
The 167-year-old Swiss bank was forced to access $54 billion in central bank funding due to the market instability caused by the failure of U.S. lenders Silicon Valley Bank and Signature Bank last week.
The bank’s stock price experienced significant fluctuations this week, and by Friday night, Credit Suisse had lost a quarter of its market worth.
According to a source, Swiss authorities want UBS and Credit Suisse to combine to end the problem, but neither bank is interested. Furthermore, the source said the authorities lacked the authority to compel the merger.
The Financial Times reported that UBS and Credit Suisse boards were scheduled to meet separately over the weekend.
UBS and Credit Suisse declined to comment.
Switzerland, long seen as a model of banking stability, was in a reflective mood as executives debated the direction of the major institutions in the nation.
“Banks in perpetual stress” ran the top page headline of the Neue Zuercher Zeitung daily.
Five sources with direct knowledge of the situation told Reuters that at least four of Credit Suisse’s main competitors, including Societe Generale SA (SOGN.PA) and Deutsche Bank AG (DBKGn.DE), had placed limitations on their dealings involving the Swiss bank or its assets.
According to Frederique Carrier, head of investment strategy at RBC Wealth Management, there have been discussions about additional measures. “The Swiss central bank intervening was a necessary step to put out the fires, but it might not be sufficient to restore confidence in Credit Suisse,” she said.
While officials, notably the European Central Bank and U.S. President Joe Biden, worked to reassure investors and depositors that the global banking system is secure, efforts were made to support Credit Suisse. Nonetheless, worries about deeper issues in the industry continue.
While American banks recently requested a record $153 billion in emergency liquidity from the Federal Reserve, large U.S. banks just this week gave a $30 billion lifeline to smaller lender First Republic (FRC.N).
This was due to “funding and liquidity pressures on banks, driven by eroding depositor trust,” according to rating agency Moody’s, which lowered its outlook on the U.S. banking sector to negative this week.
More monitoring was the topic of discussion in Washington to guarantee that bank executives would be held accountable.
Biden urged Lawmakers to grant regulators more authority over the industry, including the ability to levy heavier fines, seize cash, and prohibit officials from failing institutions.
According to the office of Congressman Adam Schiff, some Democratic members requested that the Justice Department and authorities look into Goldman Sachs’ (GS.N) involvement in the collapse of SVB.
After Silicon Valley Bank’s demise, banking stocks have suffered internationally, increasing concerns about more flaws in the financial system.
The S&P Banks index (.SPXBK) suffered a 21.5% decline over the past two weeks, the largest two-week calendar loss since the pandemic rattled markets in March 2020. U.S. regional bank shares plunged precipitously on Friday.
First Republic Bank lost more than 80% of its value over the previous ten trading sessions as of Friday’s close, falling 32.8%.
Although First Republic was saved from failure this week by backing from some of the largest names in American banking, investors were taken aback by revelations on its financial position and the required urgent financing.
The fall of SVB threw into sharp relief how the banking industry was pressured by a constant campaign of interest rate increases by the U.S. Federal Reserve and other central banks.
According to many experts and authorities, SVB’s failure was caused by its specialized, technologically oriented business strategy. In contrast, the broader banking system was far more resilient due to changes made years after the global financial crisis.
But, a top official at China’s central bank warned on Saturday that the financial sector might continue to face issues due to the high-interest rates in the major industrialized nations.