Credit Suisse Getting The SVB Treatment From Investors AND Regulators

Photo of Credit Suisse building
Photo by Tiia Monto under CC BY-SA 3.0

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After spending a few days dealing with the banking disaster almost no one saw coming, investors and regulators on Wednesday turned their attention to the slow-motion banking disaster almost everyone saw coming.

In the wake of US regulators moving quickly to contain the contagion of the Silicon Valley Bank collapse by backstopping its deposits, their European counterparts were forced to confront a similar reality with perpetually-troubled lender Credit Suisse before coming to a similar conclusion. Credit Suisse announced Thursday morning it would borrow up to $54 billion from the Swiss central bank.

A Swiss Miss

Credit Suisse has been ravaged by its roles in a litany of disastrous financial scandals ranging from fraudulent loans in Mozambique to the collapse of Greensill Capital to skirting Russian sanctions to the collapse of Archegos Capital Management, prompting the Zurich-based financial services giant to undertake a dramatic overhaul. But when CS delayed the release of its most recent results Tuesday, admitting that it had found some “material weaknesses” in its reporting of recent results, its balance sheet was perceived as Swiss cheese (with extra-large holes).

Investors woke up sensing Credit Suisse’s SVB moment on Wednesday, sending the bank’s stock into a nosedive. Noting the resemblance to Silicon Valley Bank, the Swiss National Bank announced late Wednesday that although it believes Credit Suisse is well-capitalized, it would provide additional liquidity if necessary.

If that sounds panicky and familiar, that’s because it is:

  • Credit Suisse shares fell almost 30% at the open on Wednesday after its biggest backer, the Saudi National Bank, declared it had decided against giving further financial support in light of recent events — though it regained much of that ground on Thursday morning.
  • Like SVB, Credit Suisse has seen deposits flow out like a strong tide, but unlike SVB, Credit Suisse’s drain has occurred over months instead of hours. In its most recent quarter, the bank saw a startling 37% rate of outflows.

But the Swiss are maintaining their sangfroid and not freaking out entirely. “There are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market,” the country’s chief regulator said in a statement.

SVB Tees, So Hot Right Now: As for SVB, the failed bank is still without a buyer despite increasingly desperate matchmaking from the FDIC, which has tried everything short of Tinder. But while the bank’s remaining assets are still objectively unappealing, its swag is hotter than ever. According to The Wall Street Journal, SVB apparel and tchotchkes are killing it on eBay, where SVB-branded cheeseboards are selling for $200. That’s dark cheddar, bro.