What You Should Know About Credit Suisse and First Republic’s Rescue
Credit Suisse is facing a critical weekend after some of its rivals grew wary of dealing with the struggling Swiss lender. At least four major banks, including Deutsche Bank and Societe Generale, are restricting new trades involving Credit Suisse or its securities. This comes as Credit Suisse’s regulators urge it to merge with UBS AG.
Recent developments show that Credit Suisse shares surged by 9% in after-market trading after reports emerged that UBS was discussing taking over all or parts of its Swiss rival. The two banks’ boards were expected to meet separately over the weekend. Additionally, Credit Suisse saw over $450 million in net outflows from its U.S. and European managed funds from Monday to Wednesday, as reported by Morningstar Direct.
Meanwhile, First Republic Bank faced a credit rating downgrade by Moody’s, causing its shares to plunge nearly 33%, despite a rescue package with $30 billion in deposits injected by large U.S. banks.
As for the U.S. banking industry, the Federal Deposit Insurance Corp (FDIC) is reportedly considering steps to facilitate takeovers of Signature Bank and Silicon Valley Bank. President Joe Biden has also addressed the banking crisis, assuring investors and depositors that the situation has calmed down after the collapse of Silicon Valley Bank and Signature. However, he urges Congress to give bank regulators greater power.
Investor sentiment remains fragile on Friday, leaving global equities under pressure while gold prices posted their largest one-week rally in three years. The dollar has slipped, and Treasury yields have fallen. With banking worries affecting the markets, investors are seeking protection against a market crash.