Credit Suisse shares resumed their slide on Friday. The shares of the ailing Swiss bank fell by 10.6 percent to 1.8070 francs by midday. The situation remains tense, said Daniel Bosshard, analyst at Luzerner Kantonalbank. "Credit Suisse's basic problem remains the lack of client trust." The Financial Market Supervisory Authority Finma and the Swiss National Bank (SNB) have confirmed that the institution has sufficient capital and liquidity. "But the markets don't really seem to trust it."
According to an insider, the banking supervisors of the European Central Bank (ECB) concluded at a special meeting that the stability of the industry in the euro zone was not affected after the recent turmoil. In addition, the supervisors had been informed that the risks of the banks vis-à-vis Credit Suisse were immaterial, the insider said. As a result, Credit Suisse shares accelerated their decline. Meanwhile, European banking and financial stocks traded only slightly lower. The ECB declined to comment.
With a drop of 27 percent so far, Credit Suisse was heading for the largest weekly price decline since the 2008 financial crisis. New uncertainty was caused on Friday by the news that DBRS Morningstar was the first global rating agency to lower Credit Suisse's rating after the Swiss central bank's bailout. DBRS lowered the major bank's issuer rating to "BBB". The agency pointed to ongoing missteps and compliance violations that led to a weakening of the company. DBRS is also concerned about whether Credit Suisse will be able to "restore stakeholder trust."
High outflows of client funds
The decisive factor is now likely to be how the bank's customers behave. "Whether depositors are sufficiently reassured to stem outflows in the next few days is, in our view, a key question," said Frédérique Carrier, head of investment strategy at RBC Wealth Management.
With a total of more than 50,000 employees, Credit Suisse is one of the world's largest asset managers. Trust in the stability of the institution is crucial for business success. After years of failures and scandals, however, this trust has recently eroded. In the fourth quarter alone, investors withdrew over 110 billion Swiss francs. In the meantime, the outflows ebbed significantly. With the uncertainty surrounding California's Silicon Valley Bank, however, uncertainty once again spread.
UBS rejects merger
In order to be able to implement possible withdrawal orders from clients, Credit Suisse is now tapping into SNB funds in tranches. If these measures do not lead to stabilization soon, experts believe that state aid or a takeover are possible next steps. So far, the two major Swiss banks UBS and Credit Suisse have rejected a forced merger, according to a media report. UBS prefers to focus on its existing strategy and is reluctant to take risks related to the crisis-ridden Credit Suisse, the news agency "Bloomberg" reported, referring to insiders. Credit Suisse wants to take its time to turn things around on its own. The two banks declined to comment.
Both UBS and Credit Suisse considered a merger as a last resort, given the significant hurdles and overlaps in such a transaction, the report said. However, the government and the banks played through a whole series of scenarios.