What are systemic banks
Credit Suisse is a systemic bank, a financial institution whose size and interconnected role make it pivotal to the stability of a country or the wider financial system. This status prompted regulators to consider swift measures to shield the Swiss economy from potential contagion, much as happened with other large U.S. banks. When major failures occur, they can ripple through markets and markets react with volatility, underscoring why authorities act decisively to contain risk.
What are systemic banks
Systemic banks matter for national and global stability because their problems can affect the whole financial network. The Financial Stability Board and the Basel Committee on Banking Supervision publish lists naming the banks that fit this profile. Credit Suisse has long appeared on such lists, along with other Swiss institutions like UBS. In 2022, Santander stood out as the sole Spanish representative on the global systemic list. The framework recognizes two categories: global systemically important banks and national systemically important banks, created by national regulators. In Spain, besides Santander, banks such as BBVA, CaixaBank, Sabadell and others have been evaluated, with capital buffers set at varied percentages in 2023.
What does it mean to be such a being
Banks designated as systemic carry higher capital requirements in addition to standard buffers. They are viewed as too big to fail, with the expectation that authorities would intervene to prevent a collapse that could trigger widespread economic harm. The level of risk determines the extra capital that must be held. In the November 2022 categorization, Credit Suisse was listed among institutions requiring additional buffers. Other large lenders like Deutsche Bank, Barclays, BNP Paribas and Goldman Sachs had elevated requirements, and institutions such as Bank of America, Citigroup or HSBC faced different higher thresholds. Some banks may be placed at the highest risk tier with even larger buffers, depending on regulatory determinations.
What is the purpose of these regulations
The post 2008 financial crisis era led to stronger oversight of large banks after the experience of 1929 and the lessons learned from near collapses. The systemic bank designation and the accompanying lists emerged to reduce the probability of a large institution failing and to limit the downstream impact. The goal is to strengthen recovery and resolution frameworks, ensuring orderly liquidation without the need for public support whenever possible.
What’s going on with Credit Suisse
Credit Suisse, a long standing Swiss institution with a history spanning more than a century and a half, has been recognized as a systemic bank on global lists. Following the distress seen in Silicon Valley Bank and Signature Bank in the United States, concerns resurfaced about Credit Suisse. The Swiss National Bank once provided a substantial liquidity facility of fifty billion euros to support the group, a move that helped ease immediate pressures but did not fully restore confidence. The bank faced challenges including losses from client attrition, regulatory penalties and governance issues. Those factors contributed to a difficult year, even as the broader system remained under scrutiny and reform efforts continued. The ongoing discussions around systemic importance reflect the balance regulators seek between stability and market discipline across the international financial landscape.