"Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide CS with liquidity" - Swiss National Bank.

Image © SNBmage

Switzerland's Franc had been an underperformer in midweek trade after global markets worked themselves into a frenzy when a speculative run on the shares of Credit Suisse led to a rout in the broader European banking sector entailing double-digit percentage losses for shares of some names.

But Swiss exchange rates steadied late in the North American session on Wednesday after the Swiss National Bank (SNB) said in a statement that it would support Credit Suisse through the provision of liquidity if such action becomes necessary for any reason at all.

"The problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets. The strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability," it said.

"Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide CS with liquidity," the SNB added in a statement made jointly with the Swiss Financial Market Supervisory Authority (FINMA).

Above: GBP/CHF shown at hourly intervals alongside USD/CHF and EUR/CHF. Click image for closer inspection.

The statement also noted that Swiss banks are required to "meet or exceed the minimum requirements of the Basel standards," and that systemically important firms like Credit Suisse also have to meet additional higher standards.

"This allows negative effects of major crises and shocks to be absorbed," the SNB and FINMA said.

Wednesday's stock market speculation about the viability of Credit Suisse was unsubstantiated by any particular set of events or circumstances but quickly led the broader market into a state of psychosis just days after funding pressures snowballed into the failures of Silicon Valley Bank (SVB) and others.

A successful federal intervention on Sunday has since circumvented the prospect of panic among depositors of other firms but it was speculation about the ready availability of deposits driving the 'bank run' that played an instrumental role in shuttering the Silicon Valley Bank.

Source: TS Lombard. To optimise the timing of international payments you could consider setting a free FX rate alert here.

But worries about the possibility of stifled bank lending to the broader economy have since led economists to write off earlier forecasts for the Federal Reserve (Fed) to lift its interest rate notably further in the months ahead, while financial markets have become leery of European banks too.

It's still not clear, however, if ill-merited financial market conditions will dislodge central banks from their earlier monetary policy paths, although Thursday's European Central Bank (ECB) decision will be revealing in this respect.

"Euro Area (EA) banks have been under heavy pressure as investors started questioning the health of banks’ balance sheet saddled with billions worth of long-duration bonds bought at negative interest rates and the prospect of their profitability in a surging funding cost environment," writes David Oneglia, a senior economist at TS Lombard, in a Wednesday research briefing.

"Like in the US, small banks were hit first, especially in countries like Italy and Spain where small bank legacy fragilities linger on amid ongoing ECB liquidity withdrawal and perceptions of limited fiscal space for backstopping the industry (Chart 1). Meanwhile, contagion spread to Credit Suisse, a notoriously troubled large globally systemic European bank with known idiosyncratic management problems – a clear weak link to short," he adds.

Above: GBP/CHF shown at daily intervals alongside USD/CHF and EUR/CHF. Click image for closer inspection.