Swiss regulators say Credit Suisse can access liquidity from the central bank if needed, racing to assuage fears around the lender after it led a rout in European bank shares.
In a joint statement, the Swiss financial regulator FINMA and the country’s central bank said that Credit Suisse “meets the capital and liquidity requirements imposed on systemically important banks”.
Governments and at least one bank were putting pressure on Switzerland to act, people familiar with the matter said.
There were no indications of a direct risk of contagion for Swiss institutions due to US banking market turmoil, FINMA and the Swiss National Bank said in their statement, alluding to the tumult unleashed by the collapse of Silicon Valley Bank and Signature Bank.
The statement came after Credit Suisse shares dropped by as much as 30 per cent on Wednesday, leading a 7 per cent fall in the European banking index, while five-year credit default swaps (CDS) for the flagship Swiss bank hit a new record high, reviving fears of a broader threat to the financial system.
Two supervisory sources told Reuters that the European Central Bank (ECB) had contacted banks on its watch to quiz them about their exposures to Credit Suisse.
One of the sources said, however, that they saw Credit Suisse’s problems as specific to that bank rather than being systemic.
The US Treasury is monitoring the situation around Credit Suisse and is in touch with global counterparts about it, a Treasury spokesperson said.
Asked about the impact of Credit Suisse’s problems on the US banking system, US Senator Bernie Sanders told Reuters: “Everybody is concerned.”
Banking stocks have been on a roller-coaster ride this week, tumbling at the start of the week in the face of assurances from US President Joe Biden before jumping on Tuesday on hopes the worst of the market rout was over.
“Markets are wild. We move from the problems of American banks to those of European banks, first of all Credit Suisse,” said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.
Germany’s financial supervisory authority (BaFin) said it saw no direct risk of contagion and the German banking system appeared robust and capable of digesting higher interest rates.
“Our main focus is currently on some smaller banks with little surplus capital and increased interest rate risks – we are closely monitoring these institutions,” a BaFin spokesperson said in a statement.
In the United States, BlackRock chief executive Laurence Fink warned the US regional banking sector remained at risk and predicted further high inflation and rate increases.
Fink described the financial situation as the “price of easy money” and said in an annual letter that he expected more US Federal Reserve interest rate increases.
He said that after the regional banking crisis, “liquidity mismatches” could follow because low rates have driven some asset owners to raise their exposure to higher-yielding investments that are not easy to sell.
“It’s too early to know how widespread the damage is,” Fink wrote, adding: “The regulatory response has so far been swift, and decisive actions have helped stave off contagion risks. But markets remain on edge.”
Rapid rises in interest rates have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders who are also worried about a recession.