(CTN News) – A Swiss National Bank vice president has said that the central bank is unable to save Credit Suisse from collapse in March, as it lacks the necessary resources.
Schlegel was quoted in SonntagsBlick as saying that the severity of the lender’s liquidity problems caught the central bank and regulators by surprise, and that the SNB could not have rescued the troubled lender by providing more liquidity and positive messaging to the market.
Despite the SNB’s efforts to save or take over Credit Suisse in order to protect its reputation, Schlegel told the newspaper that “liquidity flowed out much faster than expected” by Swiss and international regulators.
Schlegel also underscored that the SNB had “no mandate” to rescue or take over Credit Suisse.
There were panicked investors who took their money out of the bank as the crisis grew, and Credit Suisse did not have enough ready collateral on hand to be able to access the necessary funds from the Swiss central bank in order to survive in the face of this crisis.
During the month of March, the SNB set up a special uncollateralized facility so that they could bridge the gap between themselves and UBS Group AG until arrangements could be made by the latter to save the bank from its imminent demise.
In his opinion, Credit Suisse’s AT1 bonds, which were canceled as part of the takeover by UBS of Credit Suisse, should have suspended interest payments earlier on in the process, Schlegel said.
The bank would have been able to enjoy immediate financial relief as a result of this, Schlegel said.
According to Schlegel, there have been critics who have argued that the central bank should have offered more liquidity to Credit Suisse as well as offered public messages of support and encouragement to the bank.
During his interview, he asserted that a statement from the authorities would not be sufficient to solve the problem of trust and profitability, as he stated. Many people would be able to see through that if they were to do so.”
The number two at the SNB behind President Thomas Jordan responded to a question about interest rates by echoing comments made by his boss during September, when the central bank took a surprise pause in its plans to raise its benchmark interest rate.
In his opinion, it is possible that further increases will be necessary in the future.