From Credit Suisse Before Rescue Withdrawn $68.6 Billion

Credit Suisse has revealed the extent of the bank run that triggered its state-backed rescue in March. The Swiss banking giant stated that 61.2 billion Swiss francs or $68.6 billion left the bank in the first three months of this year.

The news comes after the lender reported its expected latest financial results, and its forced sale to rival Swiss bank UBS is expected to be completed soon, BBC reported.

Credit Suisse’s leading wealth management division experienced a decline in assets under management to 502.5 billion francs at the end of March, nearly 29 percent lower than in the same period last year, according to a statement from Credit Suisse.

– These outflows are moderate, but have not yet reversed as of April 24, 2023 – it adds.

‘Banks do not survive such outflows’

Bank clients began withdrawing money after the bank was hit by market turmoil that followed the collapse of Silicon Valley Bank (SVB) and Signature Bank in the U.S. in March. It is worth noting that Swiss authorities put together a rescue package for Credit Suisse that included more than 200 billion francs in financial guarantees, after which UBS agreed to acquire Credit Suisse.

The Swiss bank has operated at a loss and faced a series of problems in recent years, including allegations of money laundering. It reported a loss of 7.3 billion Swiss francs in 2022, marking the worst year since the financial crisis of 2008, and warned at that time that it did not expect to be profitable until 2024.

Commenting on the latest results, Frances Coppola, an independent banking analyst, told the BBC that Credit Suisse also experienced withdrawals of billions in the last three months of 2022.

– Then, of course, (withdrawals) in this quarter were on top of that. And banks do not survive such outflows, really not, no matter how big they are – Coppola commented.

Shanti Kelemen, Chief Investment Officer at M&G Wealth Investments, stated that given the size of the bank, the outflows would be ‘big numbers’.

– If anything, today we have confirmation of what UBS has bought – Kelemen added.

From eight billion to $3.15 billion

The collapse of SVB and Signature Bank in the U.S. occurred after the value of the assets they held plummeted as a result of rising interest rates. Bank stocks around the world fell sharply due to concerns that other lenders could face similar problems, and investors quickly began pulling their money from the already troubled Credit Suisse.

Since then, concerns about other banks have diminished, but Coppola stated that others could still face difficulties.

– I think we will see more banking turbulence. I don’t know if this will affect very large banks like this one – she added.

Swiss prosecutors have opened an investigation into the sudden takeover of Credit Suisse, which was the second-largest bank in the country. The deal has angered taxpayers and shareholders of both banks who were deprived of a vote on the takeover, and some have also claimed that it has harmed Switzerland’s global reputation as a financial center.

When announced, the deal valued Credit Suisse at $3.15 billion, while on Friday before the agreement was reached, it was valued at around eight billion dollars.