Worry about stock market tremors
Fed and ECB happy with Credit Suisse merger
03/19/2023, 10:13 p.m
The hastily completed takeover of the major Swiss bank Credit Suisse is intended to strengthen investor confidence in the global banking system. It is still unclear whether this will succeed. Fed boss Powell and ECB boss Lagarde praise the government in Bern for its energy.
US Federal Reserve Chairman Jerome Powell and US Treasury Secretary Janet Yellen have welcomed the merger of the two major Swiss banks Credit Suisse and UBS. “We welcome today’s announcements by the Swiss authorities to support financial stability,” the US Treasury Department said in the evening. We are also in close contact with international partners to support their implementation. At the same time, Powell and Yellen commented on their own banks: “The capital and liquidity positions of the US banking system are strong and the US financial system is resilient.”
The European Central Bank (ECB) also praised the takeover of the ailing Credit Suisse by its competitor UBS. ECB President Christine Lagarde stressed in the evening that she welcomed the rapid action and the decisions taken by the Swiss authorities. “They are critical to restoring orderly market conditions and ensuring financial stability.” According to Lagarde, the euro area banking sector is resilient and has strong capital and liquidity positions. “In any case, our policy toolbox is fully equipped to provide liquidity to the euro area financial system when needed and to ensure the smooth transmission of monetary policy,” stressed Lagarde.
“Central to Switzerland’s reputation”
The two banks had been pushed by politicians and the supervisory authorities to merge. The Swiss Federal Council held several meetings on the situation at CS over the weekend. The Swiss government in Bern was under considerable pressure to stabilize the situation and support Credit Suisse. Because Credit Suisse is one of the world’s largest asset managers and is one of the 30 globally systemically important banks whose failure would shake the international financial system. According to media reports, the US authorities were also involved in the talks on the emergency takeover. Both banks are very active there.
Swiss President Alain Berset said at the evening press conference in Bern that “the Federal Council is convinced that the takeover is the best solution for restoring confidence”. Credit Suisse has lost customer confidence and liquidity had to be guaranteed. Therefore, the Swiss National Bank SNB made a loan available. The President of the Swiss National Bank, Thomas Jordan, emphasized that reputation is central to the Swiss economy.