Credit Suisse faces a pivotal weekend. Here’s what could be next for the Swiss bank

Credit Suisse executives will hold meetings over the weekend to discuss the way forward for the ailing Swiss bank, people familiar with the matter said, after an emergency lifeline offered only temporary relief and its shares took another beating on Friday.

The 167-year-old Swiss bank is the biggest name in the market turmoil over the past week triggered by the collapse of US lenders Silicon Valley Bank and Signature Bank, which forced it to tap $54 billion in central bank funding.

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In the latest sign of its growing troubles, at least four major banks including Societe Generale and Deutsche Bank have banned their trading involving the Swiss lender or its securities, according to five sources with direct knowledge of the matter.

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Credit Suisse declined to comment on the banks’ action.

Chief Financial Officer Dixit Joshi’s teams will now assess scenarios for the bank in weekend meetings, which analysts speculate could include the sale of Credit Suisse or spin-off of some units or an outright buyout by a rival.

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The frantic efforts to shore up Credit Suisse come as assurances from policymakers – from the European Central Bank to US President Joe Biden – that the Granthshala banking system is safe fueled fears about wider troubles in the region.

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Already this week, big US banks swooped in with a $30 billion lifeline for smaller lender First Republic, while US banks sought a record $153 billion in emergency liquidity from the Federal Reserve in recent days.

It surpassed the previous high set during the most intense phase of the financial crisis about 15 years ago.

This reflects “funding and liquidity stress on banks driven by weak depositor confidence,” said ratings agency Moody’s, which this week lowered its outlook on the US banking system to negative.

In Washington, the focus shifted to greater oversight to ensure that banks — and their executives — were held accountable.

A White House statement said Biden – who promised Americans earlier this week that their deposits were safe – on Friday called on Congress to give regulators more power over the banking sector, including higher fines. , Withdrawing funds and barring officials from failed banks.

Banking stocks tumbled globally after the collapse of a Silicon Valley bank, raising questions about other weaknesses in the wider financial system.

Shares in Switzerland’s second-largest bank fell eight percent on Friday after Morningstar Direct said Credit Suisse had seen more than $450 million in net outflows from its US and European managed funds from March 13 to 15.

Far from restoring investor confidence, analysts, investors and bankers feel the credit facility from the Swiss central bank only gave them time to work out what to do next. The move made it the first major Granthshala bank to take an emergency lifeline since the 2008 financial crisis.

US regional bank shares were also sharply lower, as the KBW Regional Bank Index fell 5.6 percent, with PacWest shedding nearly 15 percent and First Republic more than 30 percent. The S&P 500 Bank Index fell 4.5 percent, as JPMorgan and Bank of America each fell nearly four percent.

While support from some of the biggest names in US banking staved off collapse, investors were spooked by a late disclosure by First Republic about its cash position and how much emergency liquidity it needed.

“It appears that First Republic’s brand reputation may have been damaged. (It) is a shame because it was a high quality, well run bank,” said John Petrides, portfolio manager at Tocqueville Asset Management.

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Earlier on Friday, SVB Financial Group said it had filed for a court-monitored restructuring, days after its former banking unit SVB was taken over by US regulators.

Investors are increasingly seeking insurance against a sudden drop in stocks, fearing more turmoil in the markets. Gold prices rose more than a percent as jitters in the banking sector drew investors to the “safe haven” asset.

Officials have repeatedly tried to emphasize that the current turmoil is different from the Granthshala financial crisis 15 years ago because banks are better capitalized and funds are more readily available – but their reassurances often fall on deaf ears. Are.

In an unusual move, the ECB held a second ad hoc supervisory board meeting this week to discuss stress and volatility in the banking sector.

Supervisors were told that deposits were stable in the euro area and that exposure to Credit Suisse was of no importance, a source familiar with the contents of the meeting told Reuters.

An ECB spokesman declined to comment.

Attention has now shifted to the Fed’s policy decision next week and whether it will stick with its aggressive interest rate hikes as it seeks to keep inflation under control.

The current situation with European banks is not comparable to the 2008 financial crisis, a German government spokesman said during a routine news briefing, adding that there was no cause for concern about the country’s banking sector.

Earlier, Japanese Prime Minister Fumio Kishida said…