Switzerland’s central bank has announced that it is prepared to provide financial support to Credit Suisse following a major drop in the bank’s shares, which fell as much as 30% on Wednesday. The Swiss National Bank (SNB) issued a joint statement with the Swiss financial market regulator FINMA, stating that Credit Suisse meets the “strict capital and liquidity requirements” imposed on banks that are of importance to the wider financial system.
The statement also indicated that the SNB will offer liquidity support to the embattled bank if necessary. Investors had already been jittery following the failure of Silicon Valley Bank in the US last week, and shares in Credit Suisse plunged to a new record low earlier in the day after its biggest backer appeared to rule out providing any more funding. However, the SNB’s announcement was welcomed by investors, and the bank’s share price rebounded slightly.
The statement from Swiss authorities also sought to reassure markets that the problems of “certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets.” The SNB emphasized that there were “no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market.” The bank has been in the spotlight since the collapse of the Greensill Capital group, in which Credit Suisse had invested heavily.
The bank has also faced legal issues over its handling of a spying scandal, which led to the departure of several senior executives. Despite the challenges, the SNB’s announcement has provided some stability to Credit Suisse and the wider financial system in Switzerland.
The move by the SNB is indicative of the level of concern among regulators and policymakers over the stability of the financial system in the face of recent bank failures and wider economic uncertainty. With the potential for further market volatility, many are calling for greater regulatory oversight and contingency planning. For now, the SNB’s support of Credit Suisse will provide a measure of reassurance to investors and stakeholders alike.
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