The logo of Swiss bank Credit Suisse is seen at a branch in Zurich, Switzerland, 3 November 2021.
Arnd Wlegmann | Reuters
The contagion effect of the recent collapse of Silicon Valley Bank is local and contained, said Axel Lehmann, Chairman of the Board of Directors of Credit Suisse, on Wednesday.
Embattled lenders Silicon Valley Bank and Silvergate have not been subjected to the strict regulations that apply to larger banks in the US and other parts of the world, Lehmann told CNBC’s Hadley Gamble at a panel session in Riyadh.
“I look at what happened at Silicon Valley Bank and later other mid-sized banks — they’re not really under tight regulation like you’ve been in other parts of the world,” he said, citing the Basel III Requirement underlying most banks’ operational framework.
“Well in that regard, I think [the contagion] is somewhat local and limited,” he said.
However, the Silicon Valley bank fallout still serves as a “red flag” for the overall market climate, the chairman warned.
European markets closed sharply lower on Monday amid the aftermath of the SVB crisis. On Friday, SVB was taken over by regulators after massive withdrawals effectively sparked a bank run a day earlier. HSBC then agreed on Monday to buy the UK arm of the troubled US startup-focused lender for £1. Contagion concerns and increased regulation and just some general profit-taking meant European banks posted their worst day in more than a year on Monday.
Credit Suisse itself has seen significant volatility over the period, falling another 9% as of Wednesday morning. The Swiss lender announced on Tuesday that it had identified “certain material weaknesses” in its internal control over financial reporting for 2021 and 2022. It also recently confirmed its 2022 results announced on February 9, which reported a full-year net loss of 7.3 billion Swiss francs ($8 billion).
When asked if he would rule out government aid in the future, Lehmann replied: “That’s not the issue.” “We are regulated, we have strong capital ratios, a very strong balance sheet. We’re all on board. So that’s not the issue at all.”
A focus on de-risking Credit Suisse’s balance sheet is also underway, he added.
2023 and 2024 are the years for the bank to stabilize, Lehmann said, with a focus on the global wealth management business in Asia, the Middle East and Latin America.