SVB updates: Swiss govt 'pressured' by another nation to intervene on Credit Suisse, says Report

Fears about the world banking system spread to Europe on Wednesday as shares in the globally connected Swiss bank Credit Suisse plunged and dragged down other major European lenders in the wake of bank failures in the United States.

At one point, Credit Suisse shares lost more than a quarter of their value, hitting a record low after the bank's biggest shareholder — the Saudi National Bank — told news outlets that it would not put more money into the Swiss lender, which was beset by problems long before the U.S. banks collapsed.

The turmoil prompted an automatic pause in trading of Credit Suisse shares on the Swiss market and sent shares of other European banks tumbling, some by double digits. That fanned new fears about the health of financial institutions following the recent collapse of Silicon Valley Bank and Signature Bank in the U.S.

Speaking Wednesday at a financial conference in the Saudi capital of Riyadh, Credit Suisse Chairman Axel Lehmann defended the bank, saying, “We already took the medicine” to reduce risks.

When asked if he would rule out government assistance in the future, he said: “That’s not a topic. ... We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that’s not a topic whatsoever.”

A day earlier, Credit Suisse reported that managers had identified “material weaknesses” in the bank’s internal controls on financial reporting as of the end of last year. That fanned new doubts about the bank’s ability to weather the storm.

Credit Suisse stock dropped about 30%, to about 1.6 Swiss francs ($1.73), before clawing back to a 24% loss at 1.70 francs ($1.83) in late afternoon trading on the SIX stock exchange. At its lowest, the price was down more than 85% from February 2021.

The stock has suffered a long, sustained decline: In 2007, the bank's shares traded at more than 80 francs ($86.71) each.

With concerns about the possibility of more hidden trouble in the banking system, investors were quick to sell bank stocks. (AP)

The Treasury Department is actively reviewing the US financial sector’s exposure to Credit Suisse Group AG after the bank’s stock saw its biggest one-day drop on record, according to people familiar with the matter.

Officials at the Treasury Department are working closely with the Federal Reserve and European regulators, said one of the people, who spoke on condition of anonymity. Spokespersons for the Treasury Department and the Fed declined to comment. (Bloomberg)

UK stocks wiped out year-to-date gains on the back of sharp downfall in banking and commodities shares. Even Chancellor Jeremy Hunt’s budget did little to calm the panic in market which has been riled up after two US banks failure over liquidity risks. 

According to Bloomberg report, the FTSE 350 index dropped as much as 3.2% on Wednesday, the most since June as lenders including HSBC Holdings Plc and Barclays Plc plunged with global peers in the wake of turmoil at Credit Suisse Group AG and continued fallout from Silicon Valley Bank’s collapse. Oil and industrial metals slumped, dragging down Shell Plc, BP Plc, Glencore Plc and Rio Tinto Plc.

Hunt’s budget measures which involves energy support for households and added defense spending --- were already priced into the market after being reported earlier by the media.

Major US banks' stock sank on Wednesday tracking a sharp selloff in European banks after Credit Suisse Group AG plunged to record low over contagion fear.

Stocks such as Citigroup Inc. and Goldman Sachs Group Inc -- dropped by more than 4%. The KBW Bank Index plunged by as much as 5.1%, amid a downfall in Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley, and Wells Fargo & Co.

Credit Suisse stock free fall led to over $60 billion market rout in European banks.

In a statement, on Wednesday, S&P Global Ratings lowered its long-term issuer credit rating on First Republic Bank to 'BB+' from 'A-'. The rating agency also lowered the senior unsecured issue rating to 'BB+' and the subordinated and preferred stock issue ratings to 'BB-', and 'B', respectively.

Further, S&P placed all of its ratings on First Republic on CreditWatch with negative implications.

S&P believes the risk of deposit outflows is elevated at First Republic--despite actions by federal regulators. In the wake of recent bank failures due to liquidity issues and the ensuing market stress, the Federal Reserve Board announced on March 12, 2023, certain emergency liquidity measures, including the creation of the Bank Term Funding Program (BTFP) and an easing of terms offered through the discount window.

Swiss bank Credit Suisse has dropped by 24% and touched a record low on Wednesday. The downfall comes after one of the biggest backers Saudi National Bank ruled out the possibility to aid more funds in the lender. Also, Credit Suisse has come under the regulatory radar. While the clients' outflow in their ambit has raised the question of whether Credit Suisse needs government assistance.

As per reports, Credit Suisse stock plunged over fears of contagion from the collapse of two US banks. Also, its annual report for 2022 cited "material weaknesses" in internal controls.

The discomfort around Credit Suisse has even fuelled around $60 billion of rout in European banks.

European stocks gave up the previous session's gains and were back in the red zone on Wednesday as investors turned cautious on banking sector concerns. Apart from the Silicon Valley Bank collapse saga, Credit Suisse shares are tanking after its top shareholder ruled out fresh assistance.

Main indices in Paris and Milan plummeted by more than 3%, while Frankfurt and London dipped by at least 2.5%.

Credit Suisse's share price has nosedived by nearly 24%, while France-based Societe Generale has dived by around 10% roughly.

In an email to SVB UK colleagues, HSBC's CEO said, "we talked about the great potential of this organisation and the UK’s technology and life sciences sector. We’re excited to be working with such a strong team to support their customers."

He has urged SVB UK staff to assure their clients that deposits are safe and loans are protected backed by the strenght and security of HSBC.

Balaji Kridha, Head of Startup launchpad, Deshpande Startup:

It surprised me that people are blaming startups for depositing money with a bank like SVB. In the tech industry and venture capital, SVB has always been the bank of choice, especially with US entities and part of Y-Combinator. To blame startups here was completely wrongheaded.

The current situation highlights the importance of Fed & FDIC providing protections to depositors and raises questions about the health of the banking industry, particularly when it comes to potential systemic risks. It serves as a reminder for startups to diversify where their funds are deposited, with even smaller banks needing to be included in that strategy. Investors should also remain vigilant, as there could still be instability in future. This would help mitigate any ripple effects both on a global and local level.

The massive fallout of Silicon Valley Bank and its repercussions are “extremely unlikely” to spread to Japan, opines Japan's top regional banker.

Renewed worries about a US recession erupted after US bankers collapse, and fading expectations for early rate hikes by the Bank of Japan contributed to a selloff in the stocks of local lenders in recent days, said Tsutomu Yonemoto, chairman of the Regional Banks Association on Wednesday.

The sudden plunge came after bets on a shift in central bank policy - which would lift lending margins - boosted Japan’s financial stocks in recent months.

Amid heightened fears of banking crisis in the United States post SVB collapse, Federal Reserve Governor Michelle Bowman has reaffirmed that "the US banking system remains resilient and on a solid foundation."

He also said the US banking system remains resilient and continues to be on a solid foundation with strong capital and liquidity throughout the system.

"The US banking system remains resilient and on a solid foundation, with strong capital and liquidity throughout the system. The Board continues to carefully monitor developments in financial markets and across the financial system," Bowman said while addressing the Independent Community Bankers of America ICBA Live 2023 Conference on Tuesday (local time).

The Silicon Valley Bank collapsed last week, followed by the fallout of Signature Bank, creating chaos in the market.

European Central Bank policymakers are still leaning towards a half-percentage-point rate hike on Thursday, despite turmoil in the banking sector, as they expect inflation will remain too high in coming years, a source told Reuters.

Investors had begun to doubt the ECB's commitment to another big rate hike this week after the collapse of Silicon Valley Bank (SVB) in the United States sent ripples through global financial markets.

But the source close to the Governing Council said the ECB was unlikely to ditch its plan to raise rates by 50 basis points on March 16 - announced at its last meeting and repeated several times by President Christine Lagarde and her colleagues - because that would damage its credibility.

The source added that formal proposals for the meeting have not yet been distributed but policymakers have seen the new quarterly projections.

The new inflation forecasts for the next two years will be lower than in December but still put price growth well above the central bank's 2% target in 2024 and slightly above it in 2025.

(Reuters)

The spectacular collapse of Silicon Valley Bank might increase trouble for other US lenders, and even bring SoftBank Group Corp. investments under heightened scrutiny. The shaken confidence of the investors might even bring down SoftBank Group Corp's share below Masayoshi Son’s pain point, reported Bloomberg.

The US tech lender's failure has raised concerns among investors over the exposure to start-up firms in the SoftBank Vision Funds. SoftBank shares have plunged 13% in four sessions to below 5,000 yen and are nearing a level that some see as Son’s threshold for announcing a buyback. The SVB crisis has brought the spotlight in private tech investments.

Kiddopia & Mediawrkz, the two step-down subsidiaries of India's gaming and sports media platform, Nazara Tech, had unrestricted access to ₹64 crore held at Silicon Valley Bank, the company said in exchange filing. The ₹60 crore of the total amount held in the bank has been transferred to bank accounts outside of SVB. Whereas, the remaining ₹4 crore was still deposited in SVB accounts for unrestricted operational use.

Moody's Investors Service's outlook cut for the US banking system was a “a terrible overreaction”, said the head of one of the world's largest asset managers, State Street Corporation, Ron O’Hanley, in his interview with Bloomberg TV. He also added that regulators had reassured the market following the breakdown of three US banks.

“There were a lot of unique circumstances around the banks in question — both on the asset and liabilities side,” State Street Corp. Chief Executive Officer Ron O’Hanley told Bloomberg TV on Wednesday. “I don’t think it’s helpful when rating agencies treat entire sectors the same way.”

Notably, Moody's cut its outlook for the US banking system to negative from stable, citing the run on deposits at Silvergate Capital Corp., SVB Financial Group’s Silicon Valley Bank and Signature Bank that led to their collapse. 

Union Minister of State for Skill Development & Entrepreneurship and Electronics and IT , Rajeev Chandrasekhar interacted with over 450 startups, owned/co-owned by Indians, Venture Capitalists (VCs), Industry leaders and others stakeholders on the collapse of Silicon Valley Bank through video conferencing from New Delhi on Tueday. The minister assured them that the Narendra Modi government is laser-focused on helping them tide over this crisis. Read full report here

Asset managers including Invesco Ltd and Franklin Resources Inc. added shares of SVB Financial Group in the months before the SVB collapse wiped 60% off its stock value in single day. 

The two firms were among the two 10 buyers of the share since September. Other major investors in the collapsed bank were Two Sigma Investments, DE Shaw & Co., Renaissance Technologies LLC and BlackRock Inc., according to data compiled by Bloomberg from fourth quarter and more recent regulatory filings and other fund documents.

Liquidity in the world’s largest bond market is evaporating as the US banking crisis muddies the outlook for the Federal Reserve’s monetary policy.

Bid-ask spreads on two-, 10- and 30-year US government bonds jumped to the highest level in at least in six months on Tuesday, according to data compiled by Bloomberg. The 10-year yield swung in a 34-basis point range on Monday, the biggest gap since the onset of the pandemic in 2020.

“Between late cycle dynamics, an aggressive Fed, strong data and contagion risks, these risks are proving hard to stomach,” said Eugene Leow, a senior rates strategist at DBS Bank Ltd. in Singapore. The wider bid-ask spreads reflect elevated volatility that’s rendering market participants cautious, he said.

The deterioration in liquidity signals uncertainty about the Fed’s rate-hike path after the collapse of three US lenders underscored the damage wrought by higher borrowing costs. The volatility risks spreading into other assets that use Treasuries as a benchmark, with traders fearful that a wider US banking crisis may be brewing.

(Bloomberg)