Image Source : AP Swiss bank Credit Suisse in Zurich, Switzerland
Credit Suisse bank crisis: The banking crisis that started in the United States has now reached Europe as fresh troubles mounted for Credit Suisse Group AG– a global investment bank and financial services firm based in Switzerland.
According to a report by Bloomberg, UBS Group AG is offering to buy Credit Suisse Group AG for as much as $1 billion. Some media reports claimed that the deal was not struck, with conflicting reports indicating that the sinking investment company seeks more weight.
This came nearly three days after the shares of Credit Suisse sank over 30% after its biggest shareholder — the Saudi National Bank — announced it would not provide more money to the Swiss lender. Hours later, Switzerland’s central bank agreed to lend Credit Suisse up to 50 billion francs ($54 billion) to shore up its finances.
Shares dropped
On Friday, shares dropped 8% to close at 1.86 francs ($2) on the Swiss exchange. The stock has seen a long downward slide: It traded at more than 80 francs in 2007.
The Saudi bank’s chairman acknowledged surprise at the fallout from his comments but said he was “optimistic” that Credit Suisse would “go back to being what it is” — a bank with a storied legacy dating back more than a century and a half.
“I think the markets are very skittish, and they are looking for stories or things that validate concern,” Saudi National Bank Chairman Ammar al-Khudairy told CNBC on Thursday.
He called Credit Suisse’s private wealth management, domestic Swiss banking and asset management divisions “stable, long-term consistent businesses” and that the Swiss bank was “working on shedding the other, more-volatile business.”
Robust history of Credit Suisse
In the wake of reforms enacted after the 2008 financial crisis, Credit Suisse is among the 30 financial institutions known as globally systemically important banks, which have stricter scrutiny and higher capital requirements.
Credit Suisse was founded as “Schweizerische Kreditanstalt” in 1856 by industrialist Alfred Escher to finance the development of Switzerland’s complex rail network cutting through the Alps.
At the time, it was a high-risk, loss-making industry. Historians say a penchant for risk and innovation permeates through the corporate culture even today.
By 1977, Credit Suisse was at the centre of a banking scandal known as the “Chiasso Affair,” which led the bank to lose nearly 1.4 billion francs in illegal dealings by a branch in Italian-speaking Switzerland with fugitive funds from Italy.
(With inputs from AP)
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