Several banks are restricting business with Credit Suisse – but are buying the bank’s bonds

New York,London Business with other financial institutions is also becoming increasingly difficult for the crisis-ridden Credit Suisse. At least four major houses, including Deutsche Bank and Societe Generale, have restricted their dealings with the major Swiss bank or its securities. The Reuters news agency reports, citing five people with direct knowledge of the matter. The major French bank BNP made a similar decision, as previously announced.

At the same time, according to Handelsblatt information from industry circles, demand for Credit Suisse bonds is high. The background to this is the announcement by the financial institution that it would buy back its own interest-bearing securities using the liquidity provided by the central bank. The price of a bond with a remaining six-month term fell by 20 percent at times in the middle of the week. This is an indication that investors were shying away from even short-term credit risk.

However, due to the buyback offer made on Thursday, prices have recovered strongly. Many of Credit Suisse’s competitors had recently tried to buy the struggling bank’s bonds at a bargain price and then offered them to the bank for repurchase. According to Handelsblatt information from industry circles, the banks also include banks that have restricted their business activities with Credit Suisse, such as BNP Paribas.

Still, the restrictions are compounding problems for the bank, which is trying to rebuild its business and get back on its feet after a series of costly failures.

Credit Suisse teams will review scenarios over the weekend

According to a Reuters report, extraordinary meetings of different teams have been scheduled at the big bank for the weekend. This also included teams from CFO Dixit Joshi. Financial data should be processed and scenarios for the future of the major Swiss bank worked out, it said. Credit Suisse also declined to comment.

The institute has recently repeatedly asserted that it is a strong, global bank. “We basically meet and exceed all regulatory requirements. Our capital and liquidity base is very strong,” said CEO Ulrich Körner in an interview at the beginning of the week.

>> Read here: Bank stocks continue to collapse despite rescue attempts – Credit Suisse and First Republic lose double digits

Still, some major competitors have cut back on doing business with the institute. Deutsche Bank, for example, this week lowered the lending value of Credit Suisse securities such as bonds that its wealth management customers provide as collateral for loans, said a senior executive at a European wealth manager who does business with the Frankfurt-based company. The bank had previously valued these securities at 70 to 80 percent of face value, the source told Bloomberg. Deutsche Bank declined to comment.

French bank Societe General has reduced its positions with Credit Suisse as counterparty in recent weeks, is holding them for the moment but is not adding to them any further, two people familiar with the situation said. The British bank HSBC is reviewing its exposure to Credit Suisse but has not yet made a decision to reduce it, another insider said. The institute is monitoring the situation closely and will make a decision early next week.

Both institutes declined to comment. Another person reported on an international bank that had at least reduced its unsecured exposure.

Crisis surrounding Silicon Valley Bank continues to fuel uncertainty

Credit Suisse has been struggling with a loss of confidence from investors and customers for days. Originally, the triggers were home-made problems. But the crisis surrounding the American Silicon Valley Bank further fueled the uncertainty. On Friday, the further crash in the US regional bank First Republic caused further nervousness, although the ailing regional bank had received a support package worth billions.

>> Read here: 30 billion fresh deposits – major US banks are helping the ailing First Republic Bank

To show that Credit Suisse remains liquid, even when customers withdraw money, the Swiss National Bank SNB made up to 50 billion francs in loans available to it on Thursday night. The bank accepted the liquidity injection and is now tapping it in tranches.

However, the reaction of investors was restrained, the prices for credit default insurance were also moving at dizzying heights afterwards. “The basic problem of Credit Suisse remains the lack of customer trust,” explained analyst Daniel Bosshard from the Luzerner Kantonalbank. What matters now is how customers behave.

“Whether depositors are sufficiently reassured to stem outflows over the next few days is a key question, in our view,” said Frédérique Carrier, head of investment strategy at RBC Wealth Management. If stabilization doesn’t come soon, experts consider state aid, a split or a takeover to be possible next steps.

More: The Hidden Dangers of the Interest Rate Turnaround – Why Banks and Markets in Europe Are in Crisis

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