Credit Suisse intervention avoided ‘financial crisis,’ Swiss National Bank chairman says

Swiss National Bank Chairman Thomas Jordan on Wednesday said the central bank’s interventions during the fall of Credit Suisse were “crucial” to avoid a “financial crisis” worldwide.

The SNB supplied a massive lifeline to the stricken lender after a collapse in shareholder and investor confidence led to massive customer outflows. As part of this, SNB injected 168 billion Swiss francs ($185 billion) in emergency liquidity.

This bought time for the central bank, alongside regulator FINMA and the Swiss authorities, to broker Credit Suisse’s emergency sale to domestic rival UBS in March for a discounted price of just 3 billion Swiss francs.

“The SNB’s willingness and ability to provide liquidity was crucial in managing the acute crisis at Credit Suisse and thus in avoiding a financial crisis with serious economic consequences for Switzerland and the rest of the world,” Jordan told an event in Bern, Switzerland, on Wednesday, according to Reuters.

UBS in August announced that it had ended Credit Suisse’s government and central bank protections after completion of the takeover, including an emergency liquidity assistance plus (ELA+) loan of 50 billion Swiss francs obtained from the SNB.

Jordan suggested that without the ELA+ loan, which was not secured in the manner typically required by the SNB, Credit Suisse risked being unable to meet its financial obligations, jeopardizing systemic stability.

Jordan’s comments echoed those of FINMA CEO Urban Angehrn, who suggested in April that allowing Credit Suisse to fall into bankruptcy would have crippled the Swiss economy and likely resulted in deposit runs on other banks.

However, Jordan noted that that there were important lessons to be learned regarding liquidity regulations and protecting against faster and larger outflows of customer deposits, according to Reuters.

The Swiss government, SNB and FINMA faced criticism and legal challenges over their handling of the forced takeover, particularly over the lack of shareholder input and the wipeout of $17 billion of Credit Suisse’s additional tier-one (AT1) bonds, which were written down to zero while common stockholders received payouts.