Shares of global investment banking company Credit Suisse surged 19 percent on Thursday, March 16, after the Swiss National Bank (SNB) agreed to loan the bank up to $54 billion. The lifeline was offered to regain the confidence of the second-biggest lender following the collapse of U.S. banks Silicon Valley Bank and Signature Bank.
The Swiss banking giant, the first major global financial institution to be given emergency assistance since the 2008 financial crisis, announced the agreement before the Swiss stock market opened. This rippled into sending shares up as much as 33 percent before settling at a 25 percent gain, or $2.29, in midday trading.
On Wednesday, March 15, the firm’s shares fell by about 30 percent and the cost of insuring its bonds against default soared after its biggest shareholder said it would “absolutely not” provide additional support. The reported decline brought shares to an all-time low amid concerns about the bank’s health and stability that have been weighing on the stock for three months.
That same day, SNB said it was prepared to back Credit Suisse because it meets the higher financial requirements imposed on “systemically important banks.” Switzerland’s central bank also said that the problems at some U.S. banks don’t “pose a direct risk of contagion” to the central European country.
According to regulators, depositors should be assured that their money is safe as they “do not want anybody to be the person who sits in a darkened room or darkened cinema and shouts fire because that’s what prompts a rush for the exits,” said Russ Mould, investment director at the online investment platform AJ Bell.
The banking firm’s most recent sell-off appeared to be triggered by remarks from the chairman of Saudi National Bank – the biggest shareholder of Credit Suisse – when asked if the Saudi bank was open to further capital injections.
“The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory,” Saudi National Bank Chairman Ammar Al Khudairy said in an interview with Bloomberg TV. According to Al Khudairy, increasing his bank’s stake in the Swiss firm would bring an unwanted regulatory burden under Swiss, Saudi and European laws.
“If we go above 10 percent, all new rules kick in whether it be by our regulator or the Swiss regulator or the European regulator,” he said. “We are not inclined to get into a new regulatory regime. (Related: Economist: Silicon Valley Bank collapse just the “tip of the iceberg” under Brandon admin’s reckless economic policies.)
Asian investors worry about the global banking crisis
European stakeholders were relieved by the extended help by the SNB to Credit Suisse. However, Asian investors are still bothered by the global banking sector’s recent crisis as banking stocks in the region fell on Thursday.
Japan’s Topix Banks Index, a key index tracking Japanese lenders, tumbled as much as 6.4 percent in the morning session. It then trimmed some losses and closed 3.26 percent lower. The index has lost 7.4 percent so far this week. Moreover, the Standard Chartered (SCBFF) in Hong Kong (HK) closed down 5.4 percent; HSBC Holdings (HSBCPRA) ended the day 2.4 percent lower; BOC HK closed down 3.9 percent.
In South Korea, major lenders Shinhan Financial Group and KB Financial Group dropped 2.8 percent and 1.9 percent, respectively.
“What we are seeing is a definite unraveling of investor confidence across both the tech and banking sectors,” said Clifford Bennett, chief economist at ACY Securities, a Sydney-based online broker. “It is highly unlikely these concerns are going to simply vanish any time soon.”
He added that a loss of confidence by investors and depositors can bring down any bank regardless of balance sheets.
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Watch the video below that talks about Credit Suisse being saved by SNB’s lifeline loan.
This video is from the Rudyk Report channel on Brighteon.com.
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