Yesterday, Switzerland’s finance minister defended the rescue of Credit Suisse last weekend. He said that without the state-brokered takeover rival UBS, there could have been an international financial crisis.
Investors were rattled by the collapse of Credit Suisse. The focus shifted to Deutsche Bank, Germany’s largest lender, on Friday. Deutsche Bank shares fell 14% at one point.
The merger also sparked a protest in Switzerland where citizens protested the loss of two banks and their decision to merge with one. According to a poll, more than three quarters of respondents want the merger to be reversed.
Karin Keller-Stutter was Finance Minister and insisted Credit Suisse would not have survived Monday without the £2.65 million deal. She stated that without a solution, payments with CS in Switzerland would be significantly disrupted or even stopped.
Yesterday’s interview with NZZ Zurich newspaper, she stated that “The crash in CS would have sent all other banks into the abyss.” Although she denied that the US authorities had pressed her for a solution, she said: “It was obvious to everyone that a restructuring of liquidation of CS could trigger an international upheaval on the financial markets.”
After the collapse of Silicon Valley Bank, and the rescue of its UK arm HSBC, last weekend saw Credit Suisse’s desperate scramble for rescue.
Analysts were trying to assess Deutsche Bank’s strength, as it was under increasing pressure Friday due to an increase in the cost of insurance against defaulting on its debt. Analysts at research firm Autonomous stressed Deutsche’s “robust capital” and “robust liquidity positions”.
Deutsche Bank, unlike Credit Suisse, was dependent on large businesses to secure its deposits. Autonomous claims that Deutsche Bank had sufficient liquid assets to cover nearly all of the deposits. This is a sign of its strength.
Others attempted to calm nerves ahead of Monday’s markets opening. Neil Birrell, chief investor officer at Premier Miton Investors, stated that Deutsche Bank doesn’t look like Credit Suisse, Silicon Valley Bank, or even Credit Suisse. This doesn’t feel like a major problem for the banking industry.” Davide Serra (founder of Algebris), sent a message last night to his clients stating that banks in Europe are safe. “Most . . . We have a lot of capital, liquidity, and cash and are in a much better place than ever before. The European authorities are becoming annoyed. The US banks were not tightly regulated and the crisis began in the USA. . . “
He stated that “Deutsche has totally transformed” in the last seven years.