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FOCUS-Swiss Secret Credit Suisse Bailout Shakes Global Finance

John O’Donnell and Andres Gonzalez

Zurich, March 20 (Reuters)A few days before a hastily-called press conference was held late Sunday to make the world’s front page, the Swiss political elite were secretly preparing a move to shake the world.

The country’s central bank and financial regulators publicly declared Credit Suisse healthy, but behind closed doors, a race was raging to save the country’s second-largest bank.

This chain of events led to the demise of one of Switzerland’s flagship stores, a merger backed by 260 billion Swiss francs ($280 billion) in state funds, and a move to upend global finance.

The events unfolding in the landlocked country, a bastion of political neutrality that has secured its place as a safe haven for the wealthy elite, run counter to one of the key lessons of the 2008 financial crisis. concentrates even greater risk in one giant bank, UBS Group AG.

It also softens the blow to equity investors from lenders that spooked bondholders with the UBS-Credit Suisse deal, pushing up borrowing costs and threatening global economic growth.

The Swiss National Bank declined to comment, but the finance ministry did not respond to a request for comment.

Plagued by years of scandals and losses, Credit Suisse has spent months battling a crisis of self-created confidence. In just a few days, its demise was sealed.

Shortly after news broke on March 12 that the United States would step in to guarantee all deposits of two medium-sized lenders struggling to keep up with demand for cash, Credit Suisse and depositors The focus was on how to maintain trust.

Customers had already withdrawn $110 billion from the Zurich-based bank in the last three months of 2022 and were fighting to reverse the outflow.

Rainmaker, who brokered bailouts for many European banks during the financial crisis, told Reuters he doubted UBS would be asked to bolster Credit Suisse after seeing US banks collapse. He said there was no room for

Bankers called UBS on March 13 to warn the world’s largest wealth manager to prepare for a call from Swiss authorities.

By Wednesday, two days later, Credit Suisse was in full-blown crisis. The comments of Ammar Al Khudairy, chairman of the Saudi National Bank, who said he could no longer invest in Swiss banks, sent Credit Suisse shares plummeting.

It hardly mattered if Credit Suisse’s largest investor reiterated its trust in lenders. “Because they are systemically important banks globally … they are monitored on a daily basis,” he told Reuters. “There are no surprises like you see in midsize banks in the US. It’s a completely different ecosystem.”

A huge outflow of deposits followed, a source who would advise UBS on the merger told Reuters, but did not provide figures.

Pressure was building in Zurich, the banking hub, and Bern, the capital of the Alps. But as discussions began to bail out Credit Suisse, Swiss regulators FINMA and the Swiss National Bank warned that “the problem of certain US banks poses a direct risk of contagion to Swiss financial markets.” They will fund the bank with unlimited access to the funds.

Credit Suisse also showed stability. Banks told Reuters on Thursday that despite the global banking crisis, the average liquidity coverage ratio, a key measure of how much cash-like assets a bank holds, rose from March 8 to March. He said there was no change until the 14th.

Swiss Finance Minister Karin Keller-Sutter, a former translator and teacher just a few months old, said at a press conference on Sunday that additional aid to Credit Suisse was agreed, but in a series of urgent announcements. He said he kept it a secret for fear of panicking people.

She said she is in close contact with US Treasury Secretary Janet Yellen and UK Finance Minister Jeremy Hunt. Both countries have large Credit Suisse subsidiaries that employ thousands of people.

There was far less interaction with the European Central Bank in Frankfurt, according to people familiar with the matter. Credit Suisse divisions in Luxembourg, Spain and Germany were much smaller.

European regulators were particularly concerned that Switzerland could impose losses on bondholders. They took radical steps as taxpayer relief costs skyrocketed.

“They did this themselves,” said the official, who spoke on condition of anonymity.

A FINMA spokeswoman said the focus was on the UK and US because of the size of Credit Suisse’s business in the UK and US, but that it had also notified European authorities.

But not everyone is trapped in darkness.

Saudi investors, who own about 10% of the bank, have put pressure on Switzerland, warning it could face legal action if it does not recoup some of its ill-fated investments, said a person familiar with the matter. person said.

Saudi National Bank did not immediately respond to a request for comment

“The money had to come from somewhere,” said one of the officials involved in the negotiations.

Credit Suisse’s board was interested in staying united in an increasingly difficult situation and stood by them and insisted on paying shareholders, the people said.

The regulator also wants to avoid a shareholder wipeout that could lead to a bank liquidation that could cause a bigger headache for the country and lose face in the hours after it sided with Credit Suisse. was

Ultimately Switzerland agreed, choosing to wipe out CHF16 billion of bonds, compensating shareholders with CHF3 billion, and upending a key principle of bank financing. bank failure.

This marks an ignominious end to the institution founded by Swiss tycoon Alfred Escher, affectionately known as Alfred I, who helped build the country’s railways. Credit Suisse provides banking to many Swiss companies and citizens. Among them is Finance Minister Keller Sutter.

When a panel of Swiss officials and executives announced the deal on Sunday, they were unrepentant.

“This is not a salvation,” Keller Sutter told journalists. Central Bank Governor Thomas Jordan has defended the package as it needs to counter wider shocks.

“Taxpayers in this scenario are less at risk,” said Keller-Sutter. “The loss to the Swiss economy would have been enormous, so bankruptcy would have been the biggest risk.”

Still, the market is reeling from the extraordinary turn of events.

One official said, “If you’re a millionaire bank, your deposits can run out quickly. You can die in three days.”

($1 = 0.9287 Swiss Francs)

Rescuing Credit Suissehttps://tmsnrt.rs/3Fz4qbM

(Additional reporting in Dubai by Stefania Spezzati, John Reville, Greg Rumeliotis, Saeed Azar and Lacna Appal; Editing by Elisa Martinzzi and Anna Driver)

((john.odonnell@thomsonreuters.com;))

The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.

Summarize this content to 100 words
John O’Donnell and Andres Gonzalez

Zurich, March 20 (Reuters) – A few days before a hastily-called press conference was held late Sunday to make the world’s front page, the Swiss political elite were secretly preparing a move to shake the world.
The country’s central bank and financial regulators publicly declared Credit Suisse healthy, but behind closed doors, a race was raging to save the country’s second-largest bank.
This chain of events led to the demise of one of Switzerland’s flagship stores, a merger backed by 260 billion Swiss francs ($280 billion) in state funds, and a move to upend global finance.
The events unfolding in the landlocked country, a bastion of political neutrality that has secured its place as a safe haven for the wealthy elite, run counter to one of the key lessons of the 2008 financial crisis. concentrates even greater risk in one giant bank, UBS Group AG.

It also softens the blow to equity investors from lenders that spooked bondholders with the UBS-Credit Suisse deal, pushing up borrowing costs and threatening global economic growth.
The Swiss National Bank declined to comment, but the finance ministry did not respond to a request for comment.
Plagued by years of scandals and losses, Credit Suisse has spent months battling a crisis of self-created confidence. In just a few days, its demise was sealed.
Shortly after news broke on March 12 that the United States would step in to guarantee all deposits of two medium-sized lenders struggling to keep up with demand for cash, Credit Suisse and depositors The focus was on how to maintain trust.
Customers had already withdrawn $110 billion from the Zurich-based bank in the last three months of 2022 and were fighting to reverse the outflow.
Rainmaker, who brokered bailouts for many European banks during the financial crisis, told Reuters he doubted UBS would be asked to bolster Credit Suisse after seeing US banks collapse. He said there was no room for

Bankers called UBS on March 13 to warn the world’s largest wealth manager to prepare for a call from Swiss authorities.
By Wednesday, two days later, Credit Suisse was in full-blown crisis. The comments of Ammar Al Khudairy, chairman of the Saudi National Bank, who said he could no longer invest in Swiss banks, sent Credit Suisse shares plummeting.
It hardly mattered if Credit Suisse’s largest investor reiterated its trust in lenders. “Because they are systemically important banks globally … they are monitored on a daily basis,” he told Reuters. “There are no surprises like you see in midsize banks in the US. It’s a completely different ecosystem.”
A huge outflow of deposits followed, a source who would advise UBS on the merger told Reuters, but did not provide figures.
Pressure was building in Zurich, the banking hub, and Bern, the capital of the Alps. But as discussions began to bail out Credit Suisse, Swiss regulators FINMA and the Swiss National Bank warned that “the problem of certain US banks poses a direct risk of contagion to Swiss financial markets.” They will fund the bank with unlimited access to the funds.
Credit Suisse also showed stability. Banks told Reuters on Thursday that despite the global banking crisis, the average liquidity coverage ratio, a key measure of how much cash-like assets a bank holds, rose from March 8 to March. He said there was no change until the 14th.

Swiss Finance Minister Karin Keller-Sutter, a former translator and teacher just a few months old, said at a press conference on Sunday that additional aid to Credit Suisse was agreed, but in a series of urgent announcements. He said he kept it a secret for fear of panicking people.
She said she is in close contact with US Treasury Secretary Janet Yellen and UK Finance Minister Jeremy Hunt. Both countries have large Credit Suisse subsidiaries that employ thousands of people.
There was far less interaction with the European Central Bank in Frankfurt, according to people familiar with the matter. Credit Suisse divisions in Luxembourg, Spain and Germany were much smaller.
European regulators were particularly concerned that Switzerland could impose losses on bondholders. They took radical steps as taxpayer relief costs skyrocketed.
“They did this themselves,” said the official, who spoke on condition of anonymity.
A FINMA spokeswoman said the focus was on the UK and US because of the size of Credit Suisse’s business in the UK and US, but that it had also notified European authorities.

But not everyone is trapped in darkness.
Saudi investors, who own about 10% of the bank, have put pressure on Switzerland, warning it could face legal action if it does not recoup some of its ill-fated investments, said a person familiar with the matter. person said.
Saudi National Bank did not immediately respond to a request for comment
“The money had to come from somewhere,” said one of the officials involved in the negotiations.
Credit Suisse’s board was interested in staying united in an increasingly difficult situation and stood by them and insisted on paying shareholders, the people said.
The regulator also wants to avoid a shareholder wipeout that could lead to a bank liquidation that could cause a bigger headache for the country and lose face in the hours after it sided with Credit Suisse. was
Ultimately Switzerland agreed, choosing to wipe out CHF16 billion of bonds, compensating shareholders with CHF3 billion, and upending a key principle of bank financing. bank failure.

This marks an ignominious end to the institution founded by Swiss tycoon Alfred Escher, affectionately known as Alfred I, who helped build the country’s railways. Credit Suisse provides banking to many Swiss companies and citizens. Among them is Finance Minister Keller Sutter.
When a panel of Swiss officials and executives announced the deal on Sunday, they were unrepentant.
“This is not a salvation,” Keller Sutter told journalists. Central Bank Governor Thomas Jordan has defended the package as it needs to counter wider shocks.
“Taxpayers in this scenario are less at risk,” said Keller-Sutter. “The loss to the Swiss economy would have been enormous, so bankruptcy would have been the biggest risk.”
Still, the market is reeling from the extraordinary turn of events.
One official said, “If you’re a millionaire bank, your deposits can run out quickly. You can die in three days.”
($1 = 0.9287 Swiss Francs)
Rescuing Credit Suissehttps://tmsnrt.rs/3Fz4qbM
(Additional reporting in Dubai by Stefania Spezzati, John Reville, Greg Rumeliotis, Saeed Azar and Lacna Appal; Editing by Elisa Martinzzi and Anna Driver)

((john.odonnell@thomsonreuters.com;))

The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc.

https://www.nasdaq.com/articles/focus-switzerlands-secretive-credit-suisse-rescue-rocks-global-finance FOCUS-Swiss Secret Credit Suisse Bailout Shakes Global Finance

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