Credit Suisse Was Bailed but Clients Keep Pulling Out Money
Credit Suisse is trying to lure investments from wealthy clients in Asia by offering higher deposit rates than its competitors, Reuters has reported citing people familiar with the development.
Sources said the offers are valid until the end of this quarter and only apply to new cash deposits, not to existing portfolios.
The Swiss National Bank and Finma, the top financial regulator in Switzerland, said Credit Suisse “meets the higher capital and liquidity requirements applicable to systemically important banks.”
The regulators didn’t provide details of what type of liquidity they would offer, but said they are in very close contact with the bank.
“If regulators do not handle the Credit Suisse situation well, this will send shock waves through the whole sector,” said Joost Beaumont, head of bank research at Dutch lender ABN Amro.
Credit Suisse has been the problem child of European banking for several years.
Repeated scandals and financial losses have hammered the 166-year-old bank, which combines a wealth-management business catering to the world’s elite rich with a Wall Street investment bank.
The bank is classified as a “systemically important financial institution” under international banking rules created after the collapse of Lehman Brothers.
Such designations require the bank to hold higher amounts of capital and to maintain plans for an orderly unwinding of its operations in case it gets into trouble.
Like Silicon Valley Bank, Credit Suisse has suffered large deposit outflows in recent quarters.
Some local units briefly breached regulatory liquidity coverage ratios last fall.
That means they weren’t holding enough easy-to-sell assets, such as bonds, to safely cover customer withdrawals.
Top 4 Wall Street Banks See Big Losses
Wall Street’s 4 top banks just had $55 billion wiped off their market value in a single day.
Four of America’s biggest banks lost a combined $55 billion of market value in a single day as financial stocks plunged.
US bank shares took a beating amid fears of contagion effects from the turmoil at Silicon Valley Bank and Silvergate.
JPMorgan Chase, Bank of America, Wells Fargo and Morgan Stanley – the four most valued US lenders – saw $55 billion wiped off their combined market capitalization last Thursday, Refinitiv data show.
JPMorgan, the biggest US bank, alone saw a $22 billion tumble in its market value as its stock slid 5.41% to $130.34.
Wall Street’s Bank of America lost $16.16 billion as its share price fell 6.20% to $30.54.
Wells Fargo and Morgan Stanley saw their market capitalization drop by $10.3 billion and $6.2 billion, respectively.
Among other major US banks, Goldman Sachs and Citi also witnessed significant declines in their share prices.
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Credit Suisse Warned Investors of Potential Losses in Q4 of 2022
The SEC released Credit Suisse’s 6-K filing where the bank warns investors of potential losses due to naked short covering, more on that below.
Credit Suisse (CS) took a massive hit of $4.09 billion in Q3 and hinted at occurring losses in an upturn in markets — something we saw at the start of 2023.
The bank proceeded to hire 20 banks for a $4 billion injection in effort to pivot from Q3’s disaster.
In a statement, the bank says, “Conversely, to the extent that we have sold assets that we do not own, or have net short positions, in any of those markets, an upturn in those markets could expose us to potentially significant losses as we attempt to cover our net short positions by acquiring assets in a rising market.“
“Market fluctuations, downturns and volatility can adversely affect the fair value of our positions and our results of operations.
Adverse market or economic conditions or trends have caused, and in the future may cause, a significant decline in our net revenues and profitability.”
The closing of naked shorts this year would send affected securities soaring as buying momentum compounds.
Credit Suisse recently postponed publication of its annual report after a last-minute call from the United States Securities and Exchange Commission (SEC), which raised questions about its earlier financial statements.
The unusual intervention by the U.S regulator is the latest blow to Credit Suisse as it attempts to rebuild investor confidence after a series of scandals and setbacks that have sent its shares plunging and led clients to withdraw billions, per Reuters.
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