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The Swiss National Bank urged Credit Suisse to shore up its capital in its annual Financial Stability Report, suggesting that the bank halt dividend payments or issue more shares in order to raise money.The special attention has crushed Credit Suisse in European trading, sending shares down 7.5 per cent in pre-market trading.
While Swiss counterpart UBS was also mentioned, the SNB opined that only Credit Suisse needed to significantly change its behaviour in order to raise its level of loss-absorbing capital.
From the statement:
Despite progress achieved, the big banks’ loss absorbing capital is still below the level needed to ensure sufficient resilience given the high risks in the environment. The big banks’ importance for the Swiss economy and for financial stability requires that they further strengthen their resilience. The SNB therefore recommends that UBS continue with this process – including, in particular, a policy of dividend restraint – and that Credit Suisse significantly expand its loss-absorbing capital during the current year…
For Credit Suisse, given the low starting point and the risks in the environment, it is essential that it already substantially expand its loss-absorbing capital base during the current year. Apart from the planned reduction of risk, these improvements can also be achieved in other ways, such as by suspending dividend payments, or even by raising capital on the market through share issuance.
Earlier today, the SNB also vowed to stick with its currency ceiling, saying it would defend against a rise in the franc above €1.20 “with the utmost determination.”
It went on to characterise its outlook for the euro area economy as “extremely weak,” crediting growth estimates of 1.5 per cent for the year to an “unexpectedly strong” winter.