By Stefania Spezzati and Oliver Hirt
(RockedBuzz via Reuters) – Credit Suisse Group AG headed for a pivotal weekend after some rivals grew cautious in their dealings with the struggling Swiss lender, and its regulators urged it to pursue a agreement with UBS AG.
Credit Suisse Chief Financial Officer Dixit Joshi and his teams will hold meetings over the weekend to assess strategic scenarios for the bank, people familiar with the matter said Friday.
Swiss regulators are encouraging UBS and Credit Suisse to merge, a source familiar with the matter said, but added that both banks did not want to do so. Regulators don’t have the power to force the merger, the person said.
UBS and Credit Suisse boards were also expected to meet separately over the weekend, the Financial Times said.
Shares of Credit Suisse are up 9% in after-market trading after the FT report. Credit Suisse and UBS declined to comment on the report.
Credit Suisse, a 167-year-old bank, is the biggest name ensnared by the market turmoil sparked by the collapse of US lenders Silicon Valley Bank and Signature Bank in the past week, forcing it to raise $54 billion in central bank funding.
In the latest sign of its growing problems, at least four major banks, including Societe Generale SA and Deutsche Bank AG, have imposed restrictions on their operations involving the Swiss lender or its securities, according to five sources with direct knowledge of the matter.
“Credit Suisse is a very special case,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management. “Switzerland’s central bank intervention was a necessary step to calm the flames, but it may not be enough to restore confidence in Credit Suisse, so there are talks of further measures.”
The frantic efforts to shore up Credit Suisse come as policy makers including the European Central Bank and US President Joe Biden have tried to reassure investors and depositors that the global banking system is safe. But fears of wider problems in the sector persist.
GRAPH – Credit Suisse and First Republic Bank
Already this week, big US banks had to step in with a $30 billion lifeline to smaller lender First Republic, while US banks have sought a total of $153 billion in emergency liquidity in recent days. by the Federal Reserve.
This surpassed a previous high set during the height of the financial crisis some 15 years ago.
This reflects “strains on bank funding and liquidity, driven by weakening depositor confidence,” said rating agency Moody’s, which this week downgraded its outlook on the US banking system to negative.
In Washington, attention has turned to increased oversight to ensure banks – and their executives – are held accountable.
Biden — who earlier this week promised Americans their deposits are safe — on Friday called on Congress to give regulators more power over the banking sector, including leveraging higher fines, recovering of funds and the blocking of officials from failed banks, a White House statement said.
A group of US Democratic lawmakers has also called on regulators and the Justice Department for an investigation into Goldman Sachs’ role in the collapse of SVB, the office of US Representative Adam Schiff said Friday.
MARKET PROBLEMS REMAIN
Banking stocks globally were hit by the collapse of Silicon Valley Bank, raising questions about other weaknesses in the broader financial system.
Shares of Credit Suisse, Switzerland’s second-largest bank, closed 8% down on Friday, with Morningstar Direct saying Credit Suisse recorded more than $450 million in net outflows from its US and European managed funds from 13 to 15 March.
Analysts, investors and bankers think the Swiss central bank’s lending facility – which made it the first major global bank to adopt a lifeline since the 2008 financial crisis – has only bought time to figure out what to do next.
Increased financial volatility and uncertainty about Credit Suisse’s future could cloud Switzerland’s economic outlook, but the liquidity support provided to the bank is unlikely to impact the country’s public finances, DBRS Morningstar wrote in a note. to investors.
Shares of US regional banks fell sharply on Friday, and the S&P Banks index tumbled 4.6%, taking its two-week decline to 21.5%, its worst two-week loss on the calendar since the COVID-19 pandemic rocked markets in March 2020.
First Republic Bank closed down 32.8% on Friday, taking its 10-session loss to more than 80%.
While support from some of the biggest names in US banking prevented its collapse this week, investors were surprised by First Republic’s late revelations about its cash position and how much emergency liquidity it needed.
“It seems that perhaps damage has been done to First Republic’s brand reputation. (It’s) a shame because it was a high-quality, well-managed bank,” said John Petrides, portfolio manager at Tocqueville Asset Management.
On Friday, SVB Financial Group said it had filed for court-supervised reorganisation, just days after its former SVB banking unit was taken over by US regulators.
Regulators have asked banks interested in buying SVB and Signature Bank to submit offers by Friday, people familiar with the matter said. U.S. regulators are willing to consider the government incurring losses at SVB and Signature Bank if it helps push through a sale, the Financial Times reported on Friday, citing people familiar with the matter.
Authorities have repeatedly tried to point out that the current turbulence is different from the global financial crisis 15 years ago as banks are better capitalized and funds more readily available, but their assurances have often fallen on deaf ears.
In an unusual move, the ECB held an ad hoc supervisory board meeting, its second this week, to discuss tensions and volatility in the banking sector.
Supervisors were told deposits were stable across the euro zone and exposure to Credit Suisse was insignificant, a source familiar with the meeting’s content told RockedBuzz via Reuters.
An ECB spokesman declined to comment.
(Reporting by Pete Schroeder, Jeff Mason and Costas Pitas in Washington, Shankar Ramakrishnan and Chuck Mikolajczak in New York, Sumeet Chatterjee, Joice Alves in London, Alexandra Hudson in Zurich, Francesco Canepa in Frankfurt and Medha Singh in Bangalore, Noel Randewich in Oakland , California; Screenplay by Deepa Babington, Sam Holmes and Alexander Smith; Editing by Anna Driver, Matthew Lewis and Diane Craft)
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