By Stefania Spezzati and Oliver Hirt
(Reuters) – Credit Suisse Group AG started a successful weekend after some rivals became wary of dealing with the bank as regulators urged it to seek a deal with Swiss rival UBS AG.
Credit Suisse chief financial officer Dixit Joshi and his teams will hold meetings over the weekend to assess strategic scenarios for the bank, people familiar with the matter said on Friday.
The 167-year-old bank is the biggest name caught up in market turmoil sparked by the collapse of US lenders Silicon Valley Bank and Signature Bank last week, forcing the Swiss bank to tap $54 billion in central bank funds.
Swiss regulators are encouraging UBS and Credit Suisse to merge, but neither bank wanted to do so, a source said. Regulators do not have the power to force the merger, the person said.
The boards of directors of UBS and Credit Suisse are due to meet separately over the weekend, according to the Financial Times.
Credit Suisse shares rose 9% in after-hours trading after the FT report. Credit Suisse and UBS declined to comment.
In the latest sign of the mounting troubles, at least four major banks, including Societe Generale SA and Deutsche Bank AG, have restricted their dealings with Credit Suisse or its securities, five people with direct knowledge of the matter told Reuters.
“The Swiss central bank’s intervention was a necessary step to calm the flames, but it may not be enough to restore confidence in Credit Suisse, so further action is being discussed,” said Frederique Carrier, head of investment strategy at RBC Wealth Management.
Efforts to prop up Credit Suisse come as policymakers, including the European Central Bank and US President Joe Biden, sought to reassure investors and depositors that the global banking system is safe. But fears of bigger problems in the industry persist.
Graphic: Credit Suisse and First Republic Bank https://fingfx.thomsonreuters.com/gfx/mkt/znvnblzmrvl/Pasted%20image%201679097444078.png
Earlier this week, major U.S. banks provided a $30 billion lifeline to smaller lender First Republic, while U.S. banks collectively requested a record $153 billion in liquidity from the Federal Reserve over the past few days .
This reflected “bank funding and liquidity constraints due to weakening depositor confidence,” said rating agency Moody’s, which this week downgraded its outlook on the US banking system to negative.
Washington has focused on increased oversight to ensure banks – and their leaders – are held accountable.
Biden called on Congress to give regulators more power over the banking sector, including imposing higher fines, clawing back funds and excluding officials from failed banks.
Some Democratic lawmakers have asked regulators and the Justice Department to investigate Goldman Sachs’ role in the collapse of SVB, Rep. Adam Schiff’s office said.
MARKET DISTURBANCES REMAIN
Bank stocks have been battered around the world since the collapse of Silicon Valley Bank, raising questions about other weaknesses in the financial system.
U.S. regional bank stocks fell sharply on Friday and the S&P Banking Index fell 4.6%, bringing its past two-week decline to 21.5%, its worst two-week calendar loss since the COVID-19 pandemic hit Markets shook in March 2020.
First Republic Bank ended Friday down 32.8%, bringing its loss over the past 10 sessions to more than 80%. Moody’s downgraded the bank’s credit rating after the market closed.
While support from some of the biggest names in US banking kept First Republic from collapsing this week, investors were spooked by the disclosure of its liquidity and how much emergency liquidity it required.
SVB Financial Group filed for a bankruptcy court-supervised reorganization days after regulators acquired its Silicon Valley Bank division.
Regulators had asked banks interested in buying SVB and Signature Bank to submit bids by Friday, people familiar with the matter said.
Regulators are considering retaining ownership of Signature and SVB securities to allow smaller banks to participate in auctions for the collapsed lenders, a source familiar with the matter said.
(Reporting by Reuters bureaus; writing by Lincoln Feast; editing by William Mallard)
