The Swiss Financial Market Supervisory Authority (FINMA) and the Swiss National Bank (SNB) have issued a joint statement on “market uncertainty.”
The statement follows the rapid decline in the share value of Credit Suisse (NYSE:CS). The global bank is viewed as the worst home in an already bad neighborhood, recently acknowledging shortcomings in its operations. In the annual report published yesterday, the bank stated:
“the Board of Directors of Credit Suisse (Schweiz) AG concluded that this material weakness could result in misstatements of account balances or disclosures that would result in a material misstatement to the annual financial statements of Credit Suisse (Schweiz) AG that potentially would not be prevented or detected. As a consequence, the statutory auditor PricewaterhouseCoopers AG (PwC) has noted that Credit Suisse (Schweiz) AG did not design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements within this system.”
The “material weakness” references the bank’s internal control over financial reporting that was deemed not to be effective as it “did not design and maintain an effective risk assessment process to identify and analyze the risk of material misstatements in its financial statements.”
The timing could not have been worse, as the US is in the midst of a banking upheaval.
FINMA and SNB are seeking to reassure markets by declaring that the “problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets.”
The two entities said that strict capital and liquidity requirements applicable to Swiss financial institutions ensure their stability.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will provide CS with liquidity. FINMA and the SNB are pointing out in this joint statement that there are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market. Regulation in Switzerland requires all banks to maintain capital and liquidity buffers that meet or exceed the minimum requirements of the Basel standards. Furthermore, systemically important banks have to meet higher capital and liquidity requirements. This allows negative effects of major crises and shocks to be absorbed.”
FINMA said it was in close contact with the bank asking financial rubberneckers to move along. But the most important statement was saved for the end of the missive as the SNB said it would provide liquidity to the globally active bank if necessary, as they look to ensure market stability.