Banks scramble over stricken Credit Suisse

• Credit Suisse trying for deal that can be announced before markets open 
• More than £400bn wiped off bank shares after collapse of Silicon Valley Bank 
• Plight of Credit Suisse has also rocked markets

The future of Credit Suisse was hanging in the balance last night as potential buyers circled the stricken Swiss lender.

In the biggest banking crisis since the 2008 crash, Switzerland’s central bank was frantically trying to orchestrate a deal that could be announced before markets open tomorrow.

More than £400 billion was wiped off the bank shares last week after the collapse of Silicon Valley Bank in the US spooked savers and investors.

But the plight of Credit Suisse, which employs around 5,000 bankers in London, has also rocked markets. Its shares tested new lows last week even after it was thrown a £45 billion lifeline by the Swiss authorities. 

The 167-year-old bank is now effectively up for sale, with larger Swiss rival UBS looking to table a bid that experts say could result in the break-up of the second-largest in Switzerland.

The Bank of England is also closely monitoring developments because Credit Suisse is deemed a ‘systemically important’ bank – in other words, too big to fail. Its collapse would send shockwaves across the financial system, experts warn.

The only British banks judged too big to fail are HSBC, Barclays and Standard Chartered.

Swiss regulators told their US and UK counterparts on Friday that folding Credit Suisse into UBS was ‘plan A’ to arrest a collapse in investor confidence in Credit Suisse, the Financial Times reported.

Other options beyond a full takeover are also being discussed. Analysts say a deal could involve Credit Suisse selling its retail banking business to a local lender, though UBS – Switzerland’s largest bank – may be barred from buying it on competition grounds.

Its investment banking arm, which Credit Suisse already plans to spin off as First Boston, is also up for grabs, but the wealth management business is seen as the most attractive to potential buyers.

Nouriel Roubini – nicknamed ‘Dr Doom’ for predicting the 2008 financial crash – said merging Credit Suisse and UBS ‘will create a too-big-to-fail monster’ that would be twice the size of the Swiss economy. 

Splitting up Credit Suisse would ‘reduce systemic risk’, he added. Whatever form it takes, the Swiss central bank wants to announce a deal before markets open tomorrow to prevent further panic selling.

Frederique Carrier, head of investment strategy at RBC Wealth Management said a failure to reach a swift deal could knock investor confidence and worsen market volatility.

In his Budget last week Chancellor Jeremy Hunt said rules introduced since the 2008 financial crisis meant the UK banking system ‘remains safe, sound and well-capitalised’. He highlighted last week’s sale of Silicon Valley Bank’s UK arm to HSBC, which had protected ‘customers’ deposits at no expense to the taxpayer’.

But critics rounded on SVBUK last night after Sky News reported it paid out millions of pounds in employee bonuses just days after the rescue deal.

Credit Suisse has been dogged by a series of scandals, multi-billion dollar losses and endless boardroom upheaval.

The bank took an £8 billion hit in 2021 following the collapse of specialist finance firm Greensill Capital, where former Prime Minister David Cameron was an adviser.

It also lost £4.5billion when US investment fund Archegos went under and became the first Swiss firm to be found guilty of a corporate crime after it was found to have laundered for a Bulgarian drug cartel.

Former Lloyds Bank boss Antonio Horta-Osorio was forced out as chairman last year after he breached Covid quarantine rules to watch the European Championship football final at Wembley and the Wimbledon men’s tennis final on the same day.

Tidjane Thiam, former boss of Prudential, resigned as Credit Suisse chief executive in 2020 after a spying scandal and a highly-publicised dispute with his neighbour – a bank subordinate – that shocked Swiss society.

US investment giant BlackRock – one of Credit Suisse’s biggest clients – last night denied reports it is interested, saying it ‘is not participating in any plans to acquire all or any part of Credit Suisse’. UBS, Credit Suisse, the Swiss National Bank and the Bank of England all declined to comment.

While many of Credit Suisse’s problems are self-inflicted, the roots of the latest crisis lie in the recent rapid rise in interest rates around the world to combat runaway inflation.