Swiss Government Holds Talks on Options to Stabilize Credit Suisse

What You Need to Know

One long-shot idea is a tie-up with larger Swiss rival UBS Group, said people familiar with the matter.
Credit Suisse, which traces its roots back to 1856, is Switzerland’s second-largest lender and has been pummeled over the last several years by a series of blowups, scandals, leadership changes and legal issues.

Swiss authorities and Credit Suisse Group AG are discussing ways to stabilize the bank, according to people familiar with the matter, after comments by its biggest shareholder on Wednesday helped trigger a plunge in the stock.

The firm’s leaders and government officials have talked about options that range from a public statement of support to a potential liquidity backstop, said the people, who asked not to be identified describing private discussions.

Also among the ideas floated include a separation of the Swiss unit and a long-shot orchestrated tie-up with larger Swiss rival UBS Group AG, said the people, cautioning that it’s unclear which, if any, of these steps will actually be executed.

While scenario planning has been going on for some time, urgency has been added after the firm’s shares plummeted to a record low and the cost to insure the bank’s debt reached crisis levels.

The lender has asked the Swiss central bank and regulator Finma for public statements of support, people familiar with the matter said. Such a statement may come as soon as Wednesday, one of the people said.

Spokespeople for Credit Suisse, UBS and the Swiss National Bank declined to comment. The nation’s finance ministry didn’t respond to requests for comment.

Stock Issues

Credit Suisse’s stock plunged as much as 31% on Wednesday, while some of its bonds dropped to levels that signal financial distress, as the Saudi National Bank ruled out increasing its stake because of regulatory constraints.

The plunge helped drag all European lenders lower as investors were quick to move away from banking risk after turmoil induced by the collapse of Silicon Valley Bank.

Chief Executive Officer Ulrich Koerner on Tuesday preached patience and said the bank’s financial position is sound. He pointed to the firm’s liquidity coverage ratio, which indicates the bank can handle more than a month’s worth of outflows in a period of stress.