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Credit Suisse collapse results in balance sheet contraction of Swiss banks: Report

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Credit Suisse's high liquidity requirements were seen as playing a part in sight deposits held overnight at the Swiss National Bank falling more sharply in 2022 than in the previous ten years

The gigantic failure of Swiss banking biggie Credit Suisse, which forced its rival UBS to rescue the venture, resulted in a situation where Credit Suisse clients had to withdraw their money. The whole phenomenon has likely led to the first significant balance sheet contraction in a decade for all banks in Switzerland, a report by the Swiss Bankers Association stated recently.

In Switzerland, the balance sheet of banks fell 6.9% to 3,339.7 billion Swiss francs (USD 3.76 trillion) in 2022, said the Banking Barometer, which talks about the annual report on banking industry trends.

“The downturn among the big banks was especially large and probably driven mainly by shifts in customer funds at Credit Suisse,” the report said.

“Credit Suisse’s high liquidity requirements were also seen as playing a part in sight deposits held overnight at the Swiss National Bank falling more sharply in 2022 than in the previous ten years,” the study noted further.

“There was a certain amount of rotation into time deposits, but a large share of the decrease was caused by shifts in customer funds at Credit Suisse in October 2022,” it concluded.

The Swiss Bankers Association also acknowledged that Credit Suisse’s collapse and subsequent takeover by UBS have raised questions over the potential damage to the Swiss banking industry’s reputation.

Meanwhile, the head of Switzerland’s financial watchdog FINMA has resigned nearly six months after the body drew heavy criticism for failing to prevent Credit Suisse’s collapse.

Urban Angehrn will step down at the end of September 2023, FINMA has said in a statement.

“Being able to contribute to the sustainable improvement of the quality of the Swiss financial centre as CEO of FINMA was a unique challenge for me, and one that I tackled with all my might. However, the high and permanent stress levels had health consequences. I have considered my decision carefully and have now decided to step down,” Angehrn said.

FINMA came under scrutiny for not halting the string of scandals at Credit Suisse, whose collapse-like crisis in March 2023 led to a liquidity crisis.

The stricken bank was eventually bought by UBS in a state-engineered 3 billion Swiss franc (USD 3.37 billion) rescue. However, the acquisition, the biggest banking deal since the 2008 financial crisis, has triggered scores of legal cases brought by disgruntled investors who lost money when bonds were wiped out or were unhappy with the exchange ratio for their stock.

FINMA’s Deputy CEO Birgit Rutishauser will act as the watchdog’s interim CEO from October 1.

Meanwhile, UBS will absorb Credit Suisse’s Securities Research service in September 2023, thereby wrapping the business into its own research operations, the bank said in a letter seen by Reuters on Tuesday.

Institutional customers will now be switched to UBS Global Research while Credit Suisse’s Wealth Management clientele will not be affected by the transition as they have access to UBS IB Research, a UBS spokesperson told the media.

Credit Suisse will also reduce the volume of new markets business from September 22 as UBS moves to wind down trading in global securities at its former rival.

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