A group of executives out of Credit Suisse, an in-danger investment bank, have agreed to accept a recently extended lifeline coming from Swiss national authorities who are acting under the threat of a possible worldwide financial crisis.
Holding the title of the eighth-largest in the world, The massive Swiss investment bank had highlighted a number of “material weaknesses” when it comes to risk assessment strategy seen in a number of recently released annual reports. In the wake of the Saudi National Bank outright refusing to issue an increase of its current 10% stake in the company, the Swiss Financial Market Supervisory Authority working alongside the Swiss National Bank issued a promise to “provide liquidity” to the “systemically important” Credit Suisse if the need for such assistance arises.
Late last week, Credit Suisse issued an announcement explaining that it had elected to accept ₣50 billion, which is equivalent to about 53.9 billion USD, as direct assistance from the Swiss National Bank. This move will allow Credit Suisse to maintain more core business units and clients while executives “create a simpler and more focused bank.”
“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” explained Ulrich Koerner, the CEO of Credit Suisse, in a release. “My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.”
The recently released annual report from Credit Suisse put forth a dismal outlook by stating that the group’s performance last year was “significantly affected by the challenging macro and geopolitical environment with market uncertainty and client risk aversion,” calling it an “adverse impact on client activity across all our divisions.” The customer base for Credit Suisse took out close to $119 billion throughout the fourth quarter of the previous year as they dealt with risk and compliance failures.
The price of shares for Credit Suisse, dropped drastically from $2.49 to $1.76 between Tuesday and Wednesday as the annual report was made public and digested, climbed back up to $2.14 by the end of the week as news of the support from Swiss authorities was made public. The shares for the company have still seen staggering drops equivalent to about 83% over the past two years.
Credit Suisse has been marked as one of a group of 30 banks around the globe considered to be “systemically important” by the Financial Stability Board, which means that the failure of this bank could spark a chain-reacting financial crisis. The companies which sit on the list as systemically important are colloquially known as “too big to fail.” The Swiss National Bank has gone further to designate UBS, Raiffeisen Group, Zürcher Kantonalbank, and PostFinance as systemically important banks.
