Credit Suisse turmoil sends ripples across banking sector, but MAS assures stability

The Monetary Authority of Singapore (MAS) announced yesterday (March 16) that it has been in close contact with the Swiss Financial Market Supervisory Authority (FINMA), the parent supervisory authority of Credit Suisse, on recent developments surrounding the bank.

The Credit Suisse branch in Singapore has its main activities in private banking and investment banking, and does not serve retail customers.

FINMA and the Swiss National Bank (SNB) have also issued a joint statement on Wednesday (March 15) affirming that Credit Suisse continues to meet the higher capital and liquidity requirements applicable to Swiss systemically important banks.

Amidst fears of a wider financial crisis, MAS assured that Singapore’s banking system remains “sound and resilient”.

The banks in Singapore are well-capitalised, and undergo regular stress tests against credit and other risks. Their liquidity positions are healthy, underpinned by a stable and diversified funding base, added MAS.

These banks have also confirmed that their exposures to Credit Suisse are insignificant. However, following the string of United States bank failures as well as fears of a wider financial crisis, the stocks of Singapore banks have slumped yesterday.

Credit Suisse saw its shares plunge more than 30 percent

Credit Suisse, the second largest bank in Switzerland, saw its shares plunge more than 30 per cent after Ammar al-Khudairy, chairman of its largest shareholder, Saudi National Bank, said that it would not buy more shares in the Swiss bank on regulatory grounds.

Prices on Credit Suisse’s bonds also fell to distressed levels, indicating that investors were pricing in the possibility the bank could default.

However, the shares of the bank bounced back as much as 40 per cent the following day (March 16) in early Zurich trading after it managed to secure a loan amounting 50 billion Swiss Franc (S$72.52 billion) from SNB.

Credit Suisse is one of the 30 global financial institutions that are deemed to be “too big to fail”, and is designated as being systemically important by the international Financial Stability Board.

The failure of the bank could send shockwaves across financial markets, and heavily impact the health of the global banking system.

Featured Image Credit: Edgar Su via Reuters