YESTERDAY’s announcement from Credit Suisse was intended to eliminate any doubt raised by the Swiss National Bank’s (SNB) June financial stability report. The trouble is, it’s not just banks the SNB doubted. Its take on the economic situation was stark: “early signs of a possible recovery... have vanished”; “the risk of a rapid and marked deterioration in conditions... remains high”.
The report went on to single out Switzerland’s second-largest bank for having loss-absorbing capital levels below the international average, and the new announcements do much to allay that technical charge.
But the economic storm rages on. And the moral hazard brought by a bailout culture persists. The SNB also warned that the market had a more favourable assessment of Swiss as against other international banks “partly based on the continuing expectation of state support in the event of a crisis.”
More sandbags against a looming flood are helpful, but laying them in is hardly a moment for celebration.
Marc Sidwell is City A.M.’s managing editor.