The fate of Credit Suisse could be decided in the next 24 hours after a torrid week for Switzerland’s second biggest bank.
Local media reported that the Swiss cabinet had gathered for a crisis meeting at 5 p.m. local time (12 p.m. ET) Saturday to discuss the ailing bank’s future, as reports swirled of a possible takeover by its biggest Swiss rival, UBS (UBS). A spokesperson for the Swiss finance ministry declined to comment.
Investors and customers pulled their money out of Credit Suisse over the past several days as turmoil swept the global banking industry following the collapse of two US lenders.
Shares of the bank lost 25% over the course of the week, despite an emergency $54 billion loan from the Swiss National Bank. The price of financial contracts designed to protect investors against possible losses on its bonds soared to record levels. More than $450 million was pulled from European and US funds managed by the bank between Monday and Wednesday, according to Morningstar.
The lifeline from the Swiss central bank, announced late Wednesday night after the stock had crashed to a new record low, only bought Credit Suisse (CS) some time.
BlackRock (BLK), which owns 4% of Credit Suisse, denied a separate report in the Financial Times that it was drawing up an alternative bid for all or part of the beleagured bank.
“BlackRock is not participating in any plans to acquire all or any part of Credit Suisse, and has no interest in doing so,” a BlackRock spokesperson told CNN.
Credit Suisse, which is among the 30 most important banks in the global financial system, has been on the ropes for years following a series of scandals, huge losses and strategic missteps. Its stock is down 75% over the past 12 months. But the crisis of confidence escalated rapidly this month.
The failure of Silicon Valley Bank last week, the biggest by a US lender since the global financial crisis of 2008, sent investors fleeing other players perceived as weak.
Then Credit Suisse dropped another bombshell. Publishing its annual report on Tuesday, the 167-year-old bank acknowledged “material weakness” in its financial reporting, adding it had failed to adequately identify potential risks to its financial statements.
The following day, its biggest shareholder — the Saudi National Bank — made clear it would not be pumping any more money into the bank, after spending $1.5 billion last year for a stake of almost 10%. That spooked investors.
In a note on Thursday, JPMorgan banking analysts wrote that a takeover by UBS was the most probable endgame.
UBS would likely spin off Credit Suisse’s Swiss business since the combined market share would make up about 30% of Switzerland’s domestic banking market and mean “too much concentration risk and market share control,” they added. CNN
US Lenders Preparing for Possible Bank Runs
A record $165 billion was borrowed from the Fed after the collapse of Silicon Valley Bank.
US banks took out a combined $164.8 billion in loans from two Federal Reserve facilities over the past fortnight, Fed statistics released on Thursday showed. This came as lenders rushed to backstop liquidity in the event of bank runs in the wake of the Silicon Valley Bank collapse.
According to the data, US lenders borrowed $152.85 billion from the discount window in the week ending March 15, up from $4.58 billion in the previous week. The figure, which marks an all-time high, topped a record set during the 2008 financial crisis.
The borrowing came via the Fed’s discount window, which is a tool whereby the Fed provides liquidity to banks in the form of loans against safe collateral for up to 90 days. US lenders also obtained another $11.9 billion in loans through the Fed’s Bank Term Funding Program, a facility launched following the SVB collapse and under which funding is available for up to one year.
Earlier this week, the Financial Times reported that the top six Wall Street banks have lost around $165 billion in market capitalization this month, about 13% of their combined value, in the wake of the fallout from the largest US bank failure since 2008.
Last week, SVB, which focused on the tech and startup sectors, was shut down by the US financial authorities, thus sparking a crisis in the sector. This followed the liquidation of California-based, crypto-focused Silvergate and New York-based Signature Bank.
The Fed’s report did not specify the exact number of banks or the identity the institutions that secured funding. Meanwhile, US banking majors have given no indication they are experiencing any solvency issues.
Earlier this week, US President Joe Biden offered assurances that the American banking system remained safe, and that the government would do “whatever is needed” to protect it against a full-blown crisis. RT
Nearly 200 Banks At Risk of Collapsing Just Like Silicon Valley Bank — Report
186 U.S. banks are risk of insolvency and may collapse similar to the way Silicon Valley Bank went bankrupt last week, according to an international economic report.
A study by four economists from top universities posted to the Social Science Research Network on March 13 claimed that Federal Reserve interest rate hikes have devalued assets like U.S. Treasuries held by these banks.
“From March 07, 2022, to March 6, 2023, the federal funds rate rose sharply from 0.08% to 4.57%, and this increase was accompanied by quantitative tightening. As a result, long-dated assets similar to those held on bank balance sheets experienced significant value declines during the same period,” they wrote.
Combined, losses and uninsured leverage provide incentives for an SVB uninsured depositor run. We compute similar incentives for the sample of all U.S. banks. Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk. Overall, these calculations suggest that recent declines in bank asset values very significantly increased the fragility of the US banking system to uninsured depositor runs.
This comes as banks tapped the Fed for $165 billion in backstop liquidity, signaling banks are struggling to cover their funds.
But as Treasury Secretary Janet Yellen warned on Thursday, not all uninsured deposits would be rescued by the FDIC if future banks fail.
In other words, only the big banks would be saved.
Keep in mind, the Federal Reserve Bank launched the first phase of its Central Bank Digital Currency last November.
This is Joe Biden’s “Build Back Better” in action. INFOWARS.COM
-https://edition.cnn.com/ REUTERS / INFOWARS.COM
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