Shares in global investment bank Credit Suisse fell sharply on Wednesday sending shares plunging in other European banks.
A record drop in shares at Swiss banking giant Credit Suisse on Wednesday has fanned fears of a possible banking crisis.
US-listed shares at the global investment bank plummeted by more than a quarter after the banks largest shareholder — the Saudi National Bank — said it would not inject in more cash into the bank.
The Financial Times reported that Credit Suisse had appealed to the Swiss National Bank for a public show of support, citing people familiar with the matter.
At the close of trade in Europe on Wednesday, Credit Suisse's stock price was down 24%, having recovered slightly from its lowest ebb during the day. It was trading at around €1.84 — compared to almost €3 per share last week and more than €7.50 per share late last March.
European and US markets react
Stocks fell in Europe and Wall Street on Wednesday amid worries about the strength of banks on either side of the Atlantic. Germany's DAX had lost 3.32% at the close of trade in Europe
The FTSE 100 in London fell 3.80%.
France's CAC 40 dropped 3.68%
European STOXX 600 index (aggregating 600 of the core companies across the continent) shed almost 3%
And the STOXX Banks index of 21 leading European lenders sagged 8.4%, showing the sector under the most pressure
The S&P 500 was -0.69% at the close of trade
The Dow Jones Industrial Average was down -0.87%
The Nasdaq composite finished up at 0.05% in the green
All major cryptocurrency platforms were also deep in the red for the day; Bitcoin was the most stable, but still down 1.3%
Aftermath of Silicon Valley Bank collapse
The volatility comes after last weeks sudden collapse of Silicon Valley Bank in the US which forced authorities to intervene to prevent the spread of market disturbances.
Multi-national investment firm BlackRock's Chief Executive, Laurence Fink, warned on Wednesday that the US regional banking sector was at risk, and predicted continued high inflation and rate increases.
Europe's bank index has seen more than €120 billion ($127 billion) of value by market capitalization wiped out since March 8.
Germany's financial supervisory authority (BaFin) has moved to allay fears and said the German banking system appeared robust and capable of absorbing 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.
The European Central Bank looks poised to hike interest rates again on Thursday in a bid to tackle high inflation.
Reuters news agency cited a spokesperson from the US treasury as saying that officials are "monitoring" the problems surrounding Credit Suisse and that they have "been in touch with global counterparts."
The volatility comes after last weeks sudden collapse of Silicon Valley Bank in the US which forced authorities to intervene to prevent the spread of market disturbances.
Multi-national investment firm BlackRock's Chief Executive, Laurence Fink, warned on Wednesday that the US regional banking sector was at risk, and predicted continued high inflation and rate increases.
Europe's bank index has seen more than €120 billion ($127 billion) of value by market capitalization wiped out since March 8.
Germany's financial supervisory authority (BaFin) has moved to allay fears and said the German banking system appeared robust and capable of absorbing 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.
The European Central Bank looks poised to hike interest rates again on Thursday in a bid to tackle high inflation.
Reuters news agency cited a spokesperson from the US treasury as saying that officials are "monitoring" the problems surrounding Credit Suisse and that they have "been in touch with global counterparts."
Swiss National Bank will offer liquidity 'if necessary'
The Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA) said in a statement that "the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets," and pointed to "the strict capital and liquidity requirements" which applied to Swiss financial institutions.
The SNB said that Credit Suisse met the capital and liquidity requirements imposed on what it called "systemically important banks" and said "If necessary, the SNB will provide CS with liquidity."
kb/msh (Reuters, AP)
Credit Suisse says it will borrow up to $53.7 bn from central bank
Mounting concerns
Analysts have warned of mounting concerns over the bank's viability and the impact on the larger banking sector, as shares of other lenders sank on Wednesday after a rebound the day before.
Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.
Neil Wilson, chief market analyst at trading firm Finalto, said Wednesday that if the bank did "run into serious existential trouble, we are in a whole other world of pain".
In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but since then, the bank has endured a barrage of problems that have eaten away at its market value.
It was hit by the implosion of US fund Archegos, which cost it more than $5 billion.
Its asset management branch was rocked by the bankruptcy of British financial firm Greensill, in which some $10 billion had been committed through four funds.
The bank booked a net loss of 7.3 billion Swiss francs for the 2022 financial year.
That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector -- one of the activities on which the bank intends to refocus as part of a major restructuring plan.
© 2023 AFP
Credit Suisse will borrow up to 50 billion francs from the Swiss central bank to shore up its business
Zurich (AFP) – Credit Suisse announced Thursday that it would borrow almost $54 billion from the Swiss central bank to reinforce the group after a plunge in its share prices.
The disclosure came just hours after the Swiss National Bank said capital and liquidity levels at the lender were adequate for a "systemically important bank", even as it pledged to make liquidity available if needed.
In a statement, Credit Suisse said the central bank loan of up to 50 billion francs ($53.7 billion) would "support... core businesses and clients", adding it was also making buyback offers on about $3 billion worth of debt.
"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders," CEO Ulrich Koerner said in the statement.
"My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs."
Credit Suisse, hit by a series of scandals in recent years, saw its stock price tumble off a cliff Wednesday after major shareholder Saudi National Bank declined to invest more in the group, citing regulatory constraints.
Its shares fell more than 30 percent to a record low before regaining ground to end the day 24.24 percent down, at 1.697 Swiss francs.
Credit Suisse's market value had already taken a heavy blow this week over fears of contagion from the collapse of two US banks, as well as its annual report citing "material weaknesses" in internal controls.
Zurich (AFP) – Credit Suisse announced Thursday that it would borrow almost $54 billion from the Swiss central bank to reinforce the group after a plunge in its share prices.
The disclosure came just hours after the Swiss National Bank said capital and liquidity levels at the lender were adequate for a "systemically important bank", even as it pledged to make liquidity available if needed.
In a statement, Credit Suisse said the central bank loan of up to 50 billion francs ($53.7 billion) would "support... core businesses and clients", adding it was also making buyback offers on about $3 billion worth of debt.
"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders," CEO Ulrich Koerner said in the statement.
"My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs."
Credit Suisse, hit by a series of scandals in recent years, saw its stock price tumble off a cliff Wednesday after major shareholder Saudi National Bank declined to invest more in the group, citing regulatory constraints.
Its shares fell more than 30 percent to a record low before regaining ground to end the day 24.24 percent down, at 1.697 Swiss francs.
Credit Suisse's market value had already taken a heavy blow this week over fears of contagion from the collapse of two US banks, as well as its annual report citing "material weaknesses" in internal controls.
Mounting concerns
Analysts have warned of mounting concerns over the bank's viability and the impact on the larger banking sector, as shares of other lenders sank on Wednesday after a rebound the day before.
Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.
Neil Wilson, chief market analyst at trading firm Finalto, said Wednesday that if the bank did "run into serious existential trouble, we are in a whole other world of pain".
In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but since then, the bank has endured a barrage of problems that have eaten away at its market value.
It was hit by the implosion of US fund Archegos, which cost it more than $5 billion.
Its asset management branch was rocked by the bankruptcy of British financial firm Greensill, in which some $10 billion had been committed through four funds.
The bank booked a net loss of 7.3 billion Swiss francs for the 2022 financial year.
That came against a backdrop of massive withdrawals of funds by its clients, including in the wealth management sector -- one of the activities on which the bank intends to refocus as part of a major restructuring plan.
© 2023 AFP
Social media frenzy fuels bank busting panic
Issued on: 16/03/2023
New York (AFP) – Fearful Twitter posts and anxious WhatsApp exchanges coupled with online banking ease are seen as helping power an internet-age run on a pair of now-collapsed American lending institutions.
Both Silicon Valley Bank and Signature Bank were hit with massive withdrawals by customers fearful of losing their money, but the speed was dizzying in an age when rumors spread like wildfire on social media and apps make moving funds with the click of a button simple.
Congressman Patrick McHenry, chairman of the US House Financial Services Committee, referred to the recent turmoil as "the first Twitter fueled bank run."
Some messages that caused cold sweats among financial customers proved to be misleading, prompting calls to focus on facts not speculation.
Gone is the time when a "run on the bank" meant mobs of customers banging on bolted doors and demanding deposits back.
Now, as rumors of dwindling bank reserves ricochets about social media, customers can make them real by tapping into online accounts to transfer money.
Federal authorities took over Silicon Valley Bank (SVB) last week less than 48 hours after it first announced bad news.
The forced closure of Signature Bank came just two days later.
In between, high-profile entrepreneurs sounded an alarm and fired off advice on Twitter.
Investor Bill Ackman tweeted during the weekend that if federal regulators didn't quickly step in and guarantee all deposits, runs on other banks would start Monday.
"You should be absolutely terrified right now," investor Jason Calacanis tweeted, using all capital letters for emphasis.
"That is the proper reaction to a bank run and contagion."
Meanwhile, startup founders shared bank trouble rumors in WhatsApp groups.
"The mix of technology and fast-moving rumors fueled a crisis of unprecedented speed," researcher Jonathan Welburn of the Rand Corporation think tank told AFP.
Online banking was around during the 2008 financial crisis, but "the adoption of these technologies is definitely increasing," he said.
Circuit breakers?
Banking regulators need to put in place "circuit breakers" that could quickly suspend banking transactions in the event of cyber attacks, weather disasters, or customer panic, said Hilary Allen, a specialist in financial technologies at American University in Washington.
This is a "very political" undertaking, Allen said.
"Banking regulators need to think about what this kind of technological circuit breaker would look like, and in which circumstances they would be ready to deploy it."
Markets have seen the power of online platforms trigger surges in the prices of "meme stocks" like video game retail chain Game Stop and AMC Theaters due to endorsements in chat forums at Reddit.
"The flip side is that social media can also exacerbate panic and loss of confidence," Allen said.
In the case of SVB, fears which spread on social media resonated loudly with the bank's customers, who tended to be tech-savvy entrepreneurs keenly tuned in to online chatter.
The collapse of SVB was the second largest bank failure in the United States but played out in barely two days.
The largest bank failure in the country, that of Washington Mutual in 2008, took place over the course of eight months.
At that time, Twitter and iPhones were fledgling products; there were no WhatsApp groups, no Slack chat threads, Welburn noted.
"What happens when bankers are drowning their sorrows in the social media age?" Welburn wondered.
"Viral posts, retweets and shares could deprive regulators of precious time."
© 2023 AFP
Issued on: 16/03/2023
New York (AFP) – Fearful Twitter posts and anxious WhatsApp exchanges coupled with online banking ease are seen as helping power an internet-age run on a pair of now-collapsed American lending institutions.
Both Silicon Valley Bank and Signature Bank were hit with massive withdrawals by customers fearful of losing their money, but the speed was dizzying in an age when rumors spread like wildfire on social media and apps make moving funds with the click of a button simple.
Congressman Patrick McHenry, chairman of the US House Financial Services Committee, referred to the recent turmoil as "the first Twitter fueled bank run."
Some messages that caused cold sweats among financial customers proved to be misleading, prompting calls to focus on facts not speculation.
Gone is the time when a "run on the bank" meant mobs of customers banging on bolted doors and demanding deposits back.
Now, as rumors of dwindling bank reserves ricochets about social media, customers can make them real by tapping into online accounts to transfer money.
Federal authorities took over Silicon Valley Bank (SVB) last week less than 48 hours after it first announced bad news.
The forced closure of Signature Bank came just two days later.
In between, high-profile entrepreneurs sounded an alarm and fired off advice on Twitter.
Investor Bill Ackman tweeted during the weekend that if federal regulators didn't quickly step in and guarantee all deposits, runs on other banks would start Monday.
"You should be absolutely terrified right now," investor Jason Calacanis tweeted, using all capital letters for emphasis.
"That is the proper reaction to a bank run and contagion."
Meanwhile, startup founders shared bank trouble rumors in WhatsApp groups.
"The mix of technology and fast-moving rumors fueled a crisis of unprecedented speed," researcher Jonathan Welburn of the Rand Corporation think tank told AFP.
Online banking was around during the 2008 financial crisis, but "the adoption of these technologies is definitely increasing," he said.
Circuit breakers?
Banking regulators need to put in place "circuit breakers" that could quickly suspend banking transactions in the event of cyber attacks, weather disasters, or customer panic, said Hilary Allen, a specialist in financial technologies at American University in Washington.
This is a "very political" undertaking, Allen said.
"Banking regulators need to think about what this kind of technological circuit breaker would look like, and in which circumstances they would be ready to deploy it."
Markets have seen the power of online platforms trigger surges in the prices of "meme stocks" like video game retail chain Game Stop and AMC Theaters due to endorsements in chat forums at Reddit.
"The flip side is that social media can also exacerbate panic and loss of confidence," Allen said.
In the case of SVB, fears which spread on social media resonated loudly with the bank's customers, who tended to be tech-savvy entrepreneurs keenly tuned in to online chatter.
The collapse of SVB was the second largest bank failure in the United States but played out in barely two days.
The largest bank failure in the country, that of Washington Mutual in 2008, took place over the course of eight months.
At that time, Twitter and iPhones were fledgling products; there were no WhatsApp groups, no Slack chat threads, Welburn noted.
"What happens when bankers are drowning their sorrows in the social media age?" Welburn wondered.
"Viral posts, retweets and shares could deprive regulators of precious time."
© 2023 AFP
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