By Kirstin Ridley and Stefania Spezzati
LONDON (Reuters) – Credit Suisse came close to falling below minimum levels of cash held at the Swiss central bank days before its forced takeover by UBS, a regulatory document shows.
As of mid-March 2023, Credit Suisse barely reached its internal cash limit at the Swiss National Bank. A breach indicates a risk that the bank will not be able to make payments properly, Swiss financial regulator FINMA wrote in the German-language decree, which has not previously been disclosed.
Credit Suisse was forced into a government orchestrated rescue on March 19. That day, FINMA issued an order to justify the write-down of about $17 billion of Credit Suisse’s Additional Tier 1 (AT1) notes as a condition for the takeover.
Investor lawsuits in Switzerland over the decision to wipe out AT1 bondholders have forced FINMA to share the documentation with claimants, people with knowledge of the case said.
A copy of the document was posted by Antigua News on its website on May 15 and Reuters independently verified the authenticity of the decree.
FINMA and Credit Suisse declined to comment.
Credit Suisse applied to the Swiss central bank for emergency liquidity assistance (ELA) on March 15 in order to bridge an impending liquidity shortage, the decree says.
Earlier that day, Credit Suisse Chief Executive Ulrich Koerner said in an interview with CNA that “our capital, our liquidity basis is very very strong”.
Credit Suisse then announced in the early hours of March 16 that it intended to borrow up to 50 billion Swiss francs from the SNB after the central bank pledged liquidity “if necessary”.
Wiping out the AT1 bondholders, which upended a long-established practice of granting them priority over shareholders in a debt recovery, shocked the market and triggered lawsuits against FINMA, which has defended its decision.
FINMA stated in the decree that a viability event occurred and that Credit Suisse could therefore wipe out the instruments.
This measure would have a positive effect on Credit Suisse’s liquidity and capital situation and ensure the continued existence of the bank’s Swiss business, the decree said.
(Reporting by Kirstin Ridley and Stefania Spezzati; Writing by Stefania Spezzati; Editing by Alexander Smith)
