Credit Suisse, 48 hours for the solution. Meanwhile, the banking crisis has already cost 500 billion
Credit Suisse has two days to find the formula to reassure and convince investors before the markets open on Monday. The Financial Times reported, citing various anonymous sources, that UBS, the leading Swiss bank, is in talks to take over all or part of its rival, with the explicit blessing of the Swiss regulatory authorities.
Switzerland’s central bank “wants a simple solution” before markets open next week, the business daily said, acknowledging it is uncertain that a deal can be reached. Neither Credit Suisse nor the SNB declined to comment with AFP. Credit Suisse is certainly not expensive. After a negative week on the stock market, which forced the central bank to grant a loan of 50 billion Swiss francs (50.4 billion euros) to give relief to the Zurich-based institution and reassure the markets, on Friday evening its value was just over 8 billion Swiss francs (8.1 billion euros). But an acquisition of this size is complex, especially if done quickly.
Although regulators declared, at the height of the storm, that “Credit Suisse meets capital and liquidity requirements for systemically important banks,” soaring prices of the bank’s hedging instruments, credit default swaps (CDS ), is a sign of lack of confidence.
Credit Suisse has just returned from two years marked by various scandals, which have revealed, according to the same management, “substantial weaknesses” in its “internal control”. The Finma had reproached her for having “seriously failed to fulfill her prudential obligations” in the bankruptcy of the Greensill financial company. In 2022, the bank suffered a net loss of 7.3 billion Swiss francs, against a backdrop of massive customer withdrawals. It still expects a “substantial” pre-tax loss this year.
“It’s a bank that never seems to put its house in order,” noted IG analyst Chris Beauchamp in market commentary. As for UBS, it has spent several years recovering from the 2008 slump. And it’s unclear whether it wants to embark on another restructuring now that it’s starting to reap the benefits of its efforts.
Wall Street down. Biden: “The bank managers have to pay”
Meanwhile, according to Repubblica, the crisis has already cost 500 billion. Meanwhile, Wall Street closed its last weekly session sharply lower, unable to shake off its nervousness about the instability of the banking system. The US data on industrial production also weighed, disappointing expectations. The Dow Jones fell 1.19% to 31,861 points, the Nasdaq index fell 0.74% to 11,630 points, while the S&P 500 fell 1.12% to 3,916 points. Republic Bank tumbled 33% to $22.96 a share (-72% plunging for the full week), despite top 11 US banks (all negative on Wall Street) agreeing to contribute a total of $30bn dollars in bailout deposits.
US President Joe Biden has called on Congress to take tougher action against top managers responsible for bank cracks. “When banks fail – reads a Biden statement released by the White House – due to errors of judgment and too risky choices, it should be easier for the supervisory authorities to obtain compensation from managers, impose sanctions civilians and ban those same managers from working in the banking sector again.” The appeal comes after the financial collapse of Silicon Valley Bank and Signature Bank, which were placed under receivership by the Federal Deposit Insurance Corporation government agency. The two American banks have reported a liquidity hole after a series of high-risk investments, worth hundreds of billions of dollars.
First Republic Bank executives sold millions of dollars of company stock in the two months prior to the bank’s stock crash, the Wall Street Journal reported, specifying that it was $12 million and that the average selling price it was $130 a share.
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