Economy

Thousands of Irish tenants face the prospect of eviction from next month, compounding a housing crisis that has spread to refugees and asylum seekers looking for shelter in the country.Taoiseach Leo Varadkar, whose government is ending a winter ban on evictions from April 1, has said Ireland is 250,000 homes short of the number it needs. The stark admission comes as the nation of 5.1mn people struggles with record homelessness and the challenge of providing shelter to Ukrainian refugees and asylum seekers from other countries.“Now we’re accommodating 58,000 Ukrainians and 20,000 people in international protection. There is real pressure on housing,” said Roderic O’Gorman, integration minister.Fringe far-right groups have seized on the housing crisis and organised rare protests, some with banners proclaiming “Ireland is full”. Racist attacks on migrants have also marred Ireland’s socially progressive image.With the housing crisis expected to worsen this year, experts and tenants say a wave of evictions would put pressure on emergency services that are already at breaking point. A record 11,754 people — nearly a third of whom are children — needed emergency shelter at the end of January, according to the latest official data. Sinn Féin, the opposition group that is Ireland’s most popular party and a campaigner on housing, says 10,000 people might be evicted this year. It has urged the government to “show some compassion” and reinstate the eviction ban.The government said that more than half of eviction notices issued last autumn fell due during the period of the ban, meaning most of those tenants would be safe. But it admitted that more than 2,000 people warned last year could still be told to leave their homes. The ban was imposed last October to prevent landlords from evicting tenants during the cost-of-living crisis. Ministers had foreseen the eviction ban as only a temporary measure and said ending it would protect landlords who, for example, faced rent arrears or wanted to sell their property.Compounding the housing issue, some hoteliers are considering taking back rooms contracted to the government to house Ukrainian refugees. Such contracts can be lucrative during the winter lull, but some hotels, especially in urban areas, can earn more in the peak season that begins next month by reverting to tourism, experts say.In January, Ireland went as far as to appeal on social media for refugees not to come if they were in a safe place, saying it had run out of room for them. About 2,000 fewer Ukrainian refugees arrived that month than in December, one of the highest drops in the EU. The situation is worse for non-Ukrainian asylum seekers. Integration minister O’Gorman has had to appeal to colleagues to find sports, arts, conference and student leisure centres as well as any other halls “where camp beds, mattresses, sleeping bags” could be put out to meet unprecedented demand.Dozens of applicants have recently been rehoused in tents despite the government’s earlier pledges to find appropriate accommodation for everyone.

The number of asylum seekers in government accommodation has soared by 150 per cent to almost 20,000 in early February, from 8,000 at the start of 2022. Last year, Ireland received a record 13,651 applications for asylum; the previous high was 11,634 in 2002. In January, applications for international protection — including large numbers of people from Algeria, Nigeria, Georgia, Somalia and Zimbabwe — leapt 234 per cent on the same period last year. The rising numbers triggered social tensions in a country not known for far-right extremism and where one in eight people was born abroad.Men with dogs, sticks and a baseball bat attacked a migrant camp in Dublin at the end of January. At one recent demonstration in February, protesters were encouraged to “burn out” refugees “in the name of our culture”. An Ireland Thinks poll last month found that 56 per cent of respondents thought the country had accepted too many refugees.In a show of support last month, some 50,000 people held an anti-racism rally in the Irish capital. Varadkar said that “refugees are welcome”.On Thursday, Ireland’s president Michael D Higgins praised migrants in a televised message ahead of St Patrick’s day, which falls on March 17. Referring to the country’s patron saint, he said: “The story of his life as a migrant, we must never forget, is a reminder of the resilience and necessary courage of migrants, a reminder too of the contributions that they have made, and continue to make, to the countries they call home.” John Lannon, chief executive of Doras, an independent non-profit group promoting migrants’ rights, said the asylum accommodation system seemed “hopelessly broken”.In a country shaped by emigration to escape famine and economic hardship, “more can be done . . . to do what has been done for Irish people around the world: to provide a new start for them”, he said. More

The leaders of Japan and South Korea hailed “a new era” of diplomatic relations at the two countries’ first summit in 12 years as they eased trade tensions and agreed to resume intelligence sharing.Japan’s prime minister Fumio Kishida and South Korea’s president Yoon Suk Yeol met in Tokyo on Thursday as the Japanese leader treated his counterpart to a special dinner of sukiyaki beef and fried-rice omelette known as “omurice”. The meeting raised hopes for a lasting reset of relations between the two US allies, amid rising tensions between the US and China and a growing nuclear threat from North Korea.The two countries have long struggled with disputes dating back to Japan’s rule over its east Asian neighbour before and during the second world war, with relations reaching a postwar low in recent years.“President Yoon’s visit to Japan has served as a major step towards normalising relations between Japan and South Korea,” Kishida said at a joint news conference on Thursday evening.Ahead of the summit, Japan said it would lift export controls imposed in 2019 on chemicals vital to South Korea’s chip industry, while Seoul said it would withdraw a complaint lodged against Tokyo with the World Trade Organization over the restrictions.Seoul announced last week that victims of Japanese wartime forced labour practices would be compensated through a fund financed by South Korean companies.The US hailed the move as a “groundbreaking” step to resolve a bitter historical dispute, but it was denounced by representatives of some of the victims and South Korea’s leftwing opposition for failing to secure payments from Japanese companies. Seoul had hoped Japanese companies would make voluntary contributions to the fund but failed to gain Tokyo’s agreement. Instead, the Japanese and South Korean business lobbies will pay ¥200mn ($1.5mn) into a pair of “future partnership” funds to collaborate in areas including youth exchanges, energy security and global supply chain issues.“The need for the two countries to co-operate has increased in the wake of Covid-19, deepening US-China competition and global weaponisation of natural resources,” said Kim Byong-joon, acting chair of the Federation of Korean Industries, on Thursday.South Korean and Japanese companies, particularly in the chip sector, have been squeezed by an escalating US campaign to restrict China’s access to western technology and markets.The rapprochement has also been driven by mounting concerns in Seoul and Tokyo over the progress of North Korea’s nuclear weapons programme. Pyongyang conducted a barrage of missile launches this week to coincide with US-South Korean military drills.On Thursday, Yoon said the two countries would upgrade security co-operation and revive a landmark intelligence-sharing deal that Seoul scrapped in 2019.“If relations between both countries normalise and develop further, that would contribute to responding to our national security challenges,” said Yoon.Daniel Sneider, a lecturer in east Asian studies at Stanford University, said: “Yoon got nothing from the Japanese on the forced labour issue, but he has got other things that he wanted.”Relations between Tokyo and Seoul collapsed in 2018 after South Korea’s Supreme Court ordered two Japanese companies, Mitsubishi Heavy Industries and Nippon Steel, to compensate Korean victims of forced labour during the second world war.Tokyo has insisted that relations could not be restored until the threat of liquidation of the companies’ assets in South Korea was lifted.

That legal threat remains in theory, but analysts said Yoon’s willingness to pursue compensation for plaintiffs through Korean companies appeared to satisfy Tokyo for the time being.Christopher Johnstone, Japan chair at the CSIS think-tank and a former Pentagon official, said the prospect for a sustained thaw in relations was better than in 2015 following a landmark agreement over wartime sexual slavery, which later collapsed after it was disowned by Moon Jae-in, Yoon’s leftwing predecessor.“I think the deal will be more sustainable this time since the strategic environment is clearly different from 2015, and the two countries have a broader set of shared concerns, including not only North Korea but China as well,” said Johnstone.But Wi Sung-lac, a former senior South Korean diplomat who has advised the leader of the leftwing opposition, argued that Yoon’s failure to secure wide domestic support could limit the possibility for deeper co-operation.“The aftermath will be somewhat detrimental to the Yoon administration’s popularity,” said Wi. “That will sap the government’s energy in building a new relationship with Tokyo.” More

Good morning. The EU is to impose curbs on imports of Chinese green technologies, according to a draft of the commission’s Net Zero Industry Act to be unveiled today and seen by my brilliant colleagues.And Netherlands prime minister Mark Rutte took a battering yesterday in provincial elections won by an upstart farmers’ protest movement. His ruling coalition lost a quarter of its seats in the Dutch senate, according to an exit poll. Today, our ECB whisperer parses the dilemma in Frankfurt as the bank tries to decide on interest rates in the middle of a market meltdown. And our Paris bureau chief picks through the rubbish piling up on the pavements ahead of the parliamentary showdown on pension reform.Stick or twist?Who would be a central banker? Having clearly signalled plans to raise interest rates by half a percentage point, the European Central Bank is now being urged by former executives to do less because of turmoil in financial markets after a US bank failure, writes Martin Arnold.Context: The ECB’s governing council meets today to decide how much to raise borrowing costs to tackle high inflation. Financial markets are gyrating wildly after Silicon Valley Bank collapsed in the US and shares of Credit Suisse and other European banks have fallen on worries the crisis could spread, complicating the ECB’s task.Two of its former board members have said policymakers should scale back their planned rate hike to a quarter point, or postpone it altogether, until the scale of the problems in the banking system are clearer.“I think what happened today is a bit of a game-changer,” Vítor Constâncio, former ECB vice-president, told the FT, referring to the share price falls of European banks yesterday. “The contagion to other European banks is worrying and they should be careful.”“I think stepping down to a quarter-point move and saying they are likely to do more is justified,” said Constâncio, now an economics professor at the University of Navarra. “What is already in the public domain is enough to explain such a move and they don’t need other reasons.”The worry for the ECB is that raising borrowing costs as planned could be unwise if this week’s wobbles in the banking system become a full-blown crisis, especially as rising rates were a major factor in the collapse of SVB.“The financial contagion is equivalent to some form of tightening of monetary conditions,” said Lorenzo Bini Smaghi, another former ECB executive who now chairs French bank Société Générale. “Sticking to the 50 points increase, as if nothing happened, means implementing a tougher stance than previously thought,” he told German newspaper Börsen-Zeitung. “This could be risky and add further instability. Postponing for one month or doing only 25 points would not be a problem.” Chart du jour: Territorial disputeIn Germany, Spain, Italy, Portugal and Romania, more people think the war in Ukraine should end as soon as possible — even if that means ceding territory to Russia — than think Kyiv should fight as long as necessary to liberate all its land, according to a survey by the European Council on Foreign Relations.Reform, trashedEmmanuel Macron’s plan to raise the retirement age by two years to 64 was never going to be popular, but the French president may have underestimated just how stinky things would get, writes Leila Abboud. The sidewalks of Paris have filled up with more than 7,000 tonnes of garbage in the past week because the rubbish collectors have gone on strike. Protesters have flung bags of trash on the doorstep of the headquarters of Macron’s Renaissance party. Here’s hoping they don’t do the same thing in parliament today when lawmakers are expected to vote on the pension reform draft law.No one really knows whether Macron has enough support to pass his flagship reform. It is yet another sign of how his political hand has been weakened since his party lost legislative elections last June, leaving its centrist alliance about 40 votes short of what is needed to pass laws. Aides were counting and recounting potential votes in the Élysée yesterday, but political veterans admit that wily lawmakers will always find a way to be mysteriously absent from the hemicycle if necessary. Abstaining or skipping a vote on raising the retirement reform, which is opposed by three-quarters of the public, is a far more comfortable position for an MP than having to answer for it in their district. If he does not have the votes, Macron can resort to passing the law by decree, in effect over-ruling lawmakers under the 49.3 clause in the French constitution. But using 49.3 has a cost: it allows opposition lawmakers to call a no-confidence vote and potentially bring down the government. Triggering the 49.3 will also surely prompt Macron’s critics to say something is as rotten in the French Republic as all those piles of rubbish.What to watch today EU environment ministers meet in Brussels.EU top diplomat Josep Borrell in Albania for accession talks.Now read theseFight for 1.5: With the Paris climate goals increasingly difficult to reach, some want to scrap them altogether.Turfed out: Thousands of Irish tenants face eviction next month, in a country in need of 250,000 more homes. Not 007: Ukraine’s legal breakthrough regarding a bond . . . owned by Russia. More

Europe’s financial regulators are furious at the handling of the Silicon Valley Bank collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write.While the disapproval has yet to be conveyed in a formal setting, some of the region’s top policymakers are seething over the decision to cover all depositors at SVB, fearing it will undermine a globally agreed regime.One senior eurozone official described their shock at the “total and utter incompetence” of US authorities, particularly after a decade and a half of “long and boring meetings” with Americans advocating an end to bailouts.Europe’s supervisors are particularly irate at the US decision to break with its own standard of guaranteeing only the first $250,000 of deposits by invoking a “systemic risk exception” — despite claiming the California-based lender was too small to face rules aimed at preventing a rerun of the 2008 global financial crisis. “This is the US version of the small Venetian banks,” said one French policy expert, referring to the US’s criticism of Europe’s handling of the Monte dei Paschi debacle. “You are always systemic for somebody.”“From a financial stability perspective, they really killed a fly with a sledgehammer,” said Nicolas Véron, a regulation expert at the Washington think-tank the Peterson Institute. Designating SVB as systemic was, Véron added, a “very questionable” decision that set a dangerous precedent for further bailouts of uninsured deposits. A former senior UK policymaker who helped negotiate global standards for bank resolution described the SVB handling as a “disaster”.The 2008 crisis triggered a sea change in how to handle the collapse of banks, with policymakers meeting often at the Basel-based headquarters of the Bank for International Settlements to create regimes designed to minimise the wider fallout from failures. Central to those regimes was imposing losses on owners, bondholders and other unsecured creditors, including depositors with funds exceeding their country’s guarantee limit.The US was a key proponent of such policies, according to people who took part in talks. However — unlike EU and UK lenders of a similar size — US banks with balance sheets below $250bn, including SVB, are deemed too small to have to comply with global standards on capital, liquidity and resolution. While the Federal Reserve is now considering tougher rules for midsized lenders, in 2019 it and the Federal Deposit Insurance Corporation were behind the relaxation of resolution regimes for banks with assets ranging from $50bn to $250bn. The Systemic Risk Council, a body of former senior regulators, warned the Fed’s chair Jay Powell and the former head of the FDIC Jelena McWilliams against the move, saying it was “unclear that all of the affected banking businesses could be resolved in an orderly way”. “If ever a large regional bank failed, that uncertainty creates the possibility of the authorities resorting to a taxpayer bailout in order to contain disruption to the regional and national economy and losses to the Deposit Insurance Fund,” the letter, authored by then SRC chair and former Bank of England deputy governor Paul Tucker, stressed. The US has claimed SVB’s failure will not hit taxpayers because other banks will cover the cost of bailing out uninsured depositors — over and above what can be recouped from the lender’s assets. However, a European regulator said that claim was a “joke”, as US banks were likely to pass the cost on to their customers. “At the end of the day, this is a bailout paid for by the ordinary people and it’s a bailout of the rich venture capitalists which is really wrong,” he said.

Despite the lack of formal disapproval, Europeans’ fury is being felt on the other side of the Atlantic. “The risk to global financial regulatory co-operation is that this episode reinforces lingering suspicions that when times get tough the US won’t adhere to globally agreed reforms,” said Matt Swinehart, a former US treasury official and managing director at Rock Creek Global Advisors, a consultancy in Washington.Others, however, are more understanding of Washington’s approach, arguing that not fully bailing out depositors would have risked broader peril. “If unsecured depositors are not protected it can be the overall confidence that is eroded and you can easily be creating contagion to other banks,” said a resolution head at a eurozone regulator. “This case seems to be the perfect proof of this.” Additional reporting by Brooke Masters in New York, and James Politi and Colby Smith in Washington

Video: Fractured markets: the big threats to the financial system More

Is insurance an essential service?For someone who needs a car to keep their job, or a person with mobility problems who needs a vehicle to get around at all, the answer is clearly yes.A group of academics and public policy organisations is going further, and pushing for some insurance products to be thought of as vital for everyone — and demanding fixes to what they see as a broken market for low-income customers and people of colour.The Social Market Foundation, a UK think-tank, argued in a report this week that insurance should be considered alongside energy, fuel and food as something that everyone should have, “a vital form of resilience in times of financial strain”.For families caught up in today’s cost of living crisis, other necessities have taken precedence. “I had to cancel my contents insurance to be able to pay for my fuel. I hope nothing goes wrong,” said one low-income person in a focus group for the SMF. More than half of people in poverty are finding it difficult to afford their insurance, the organisation found.And because the insurance market is the insurance market, adversity is already penalised. Living in the wrong postcode, having a bad credit score, only being able to pay monthly or to insure single items, mean even the most conscientious drivers and homeowners pay more than others in a different situation.Low-income people are “priced out” of the market due to these factors, the SMF and others argue. In a report last year, Citizens Advice said higher insurance costs for certain areas should be viewed as an “ethnicity penalty”. These studies have limitations: researchers do not know how insurers’ pricing models actually work. Researchers are forced to draw conclusions from mystery shopper exercises, or data provided by consumers. Insurance companies insist ethnic identity is “never” an input in pricing, and a Financial Conduct Authority review in 2018 found “no evidence” of direct discrimination. Firms argue that prices reflect claims experience, nothing more. And without risk selection based on experience, there wouldn’t be an insurance sector at all. Not all of these arguments wash. We do not leave people in flood-exposed homes, for example, at the mercy of their personal risks: government intervention has driven down the cost of their home insurance. In the US, some states ban or limit the use of credit scores, reflecting concerns that certain groups are disadvantaged. Questions will keep coming. Duncan Minty, who consults on ethics in the insurance industry, says the insurance sector is one the public feels ownership of, because it is “so embedded” in our everyday lives. “It has become a form of common good,” he says.Insurers are happy to stress their social role. At a recent industry dinner, the Association of British Insurers’ Hannah Gurga declared proudly that the sector takes care of those “struck by disaster” and those who “lose their jobs”. “This industry, all of you in this room tonight, does more than any other to make our society more resilient, more secure and more compassionate,” she added.Customers that can no longer afford insurance cover due to a factor outside of their control may feel differently. The FCA is consulting on fresh guidance for how to treat customers in financial difficulty. The regulator has called on firms to show that pay-monthly charges are “proportionate”.Attention has also turned to a new consumer duty, which requires financial firms, including insurers, to demonstrate they have produced “good outcomes” in areas including pricing.Campaigners want the regulator to gather a lot more data, whether that be to investigate which firms are demanding the largest poverty premium, or to identify clear evidence of racial disparities. The SMF has called for government to consider actions such as providing state-backed insurance products for people on means-tested benefits.A lot will rest on the FCA’s use of the consumer duty, and how far it will challenge insurers over the outcomes that are spat out of their pricing models. But not everyone wants it to take a more combative approach against financial firms, with the City minister said to want to avoid creating a “compensation culture”.For an insurance sector that has already undergone significant reform in stamping out so-called loyalty penalties, another intervention seems unlikely in the short term. But with groups such as Citizens Advice promising to keep its feet to the fire, difficult questions of pricing fairness for different social groups will need answering sooner or later. More

Soon after Covid-19 first hit the UK, Andrew Bailey walked into the Bank of England as the new governor of the central bank. Just three days after taking charge in Threadneedle Street on March 16 2020, Bailey sought to prevent coronavirus unleashing economic collapse and financial market meltdown by cutting the BoE benchmark interest rate to a low of 0.1 per cent and launching a £200bn bond-buying programme. Three years later, he has not only had to navigate the British economy through a global pandemic but also respond to a domestic financial crisis during Liz Truss’s shortlived premiership and an energy shock that has fuelled the worst inflation in four decades.The BoE Monetary Policy Committee last month raised interest rates to a 15-year high of 4 per cent to curb the price increases. Consumer price inflation, which peaked at 11.1 per cent in October, now stands at 10.1 per cent.Bailey told the Financial Times: “The past three years have been busy for everyone at the bank, me included. But that’s what we’re here for. The work of the bank has a big impact on people’s lives.”Analysts say Bailey has proved himself to be effective at crisis management, notably in relation to the BoE’s role in maintaining financial stability.The latest example came at the weekend, when Bailey worked alongside Rishi Sunak and chancellor Jeremy Hunt to rapidly find a buyer for the stricken UK arm of Silicon Valley Bank. The California-based company was shut down by US regulators after a run on the bank.But analysts add the BoE — like other central banks including the US Federal Reserve and the European Central Bank — fell short in its monetary policy role by being slow to respond to the surge in inflation. They also say Bailey has been a poor communicator at key moments.He was often almost alone in his ground floor office in Threadneedle Street during the Covid lockdowns, reflecting how most staff worked from home. Despite his distance from employees, he quickly became popular by developing a collegiate modus operandi.But outside the BoE Bailey started to face questions, initially for printing £450bn under the central bank’s quantitative easing programme to flood the economy with money during the coronavirus crisis, because critics said this would fuel inflation. Then Bailey was rebuked for being late to spot inflationary pressures as the pandemic eased.Huw Pill, BoE chief economist, acknowledged there was some validity to these arguments, writing last month that he had “underestimated . . . the duration and intensity of the inflationary pressures” in the economy, and had learnt lessons.Bailey, by contrast, has defended the BoE’s decision not to start raising interest rates until December 2021, saying its actions are always informed by what it knows at the time. “We do not have the benefit of making policy with hindsight,” he told MPs last month. Some politicians have no time for Bailey’s stance. When he in February sought to reassure Harriett Baldwin, Conservative chair of the House of Commons Treasury select committee, that the BoE was on the case and acting to curb inflation, she snapped back: “No, it is your job not to have let [inflation] get to this kind of level.” Certain economists also have limited sympathy for Bailey’s view, even though they accept the BoE could not have anticipated the big increase in energy prices that followed Russia’s invasion of Ukraine in February last year.Kitty Ussher, chief economist of the Institute of Directors, a business lobby group, said it was “shocking” that the BoE under Bailey thought unemployment would rise with the end of the government’s furlough scheme for company workers in late 2021, given surveys were already showing recruitment difficulties. “They were really slow to respond [to inflation],” she added.Bailey’s concern about how labour shortages were fuelling inflation prompted him to urge workers not to demand big pay rises in February last year, but it provoked a furious response from trade unions.Julian Jessop, an independent economist, said Bailey’s pay comments were his most serious gaffe. “People should ask for the biggest pay rise they can get: wages are a relative price, like any other, and should be left to the markets,” he added.Sir Charlie Bean, a former BoE deputy governor, said Bailey had struggled to justify the central bank’s actions on inflation, partly because communication was not one of his strengths.Comparing Bailey with the previous two BoE governors, Bean added: “He’s not the greatest of communicators and neither has the intellectual coherence of Mervyn King nor the smooth style Mark Carney had.”Bailey told the FT: “People deserve straight and honest answers — even when the message isn’t going to be the most popular. It’s important to me that people understand what we’re doing and why.”After his comments about workers and pay, Bailey stressed the need for companies not to increase their prices — one key reason people have demanded wage rises — and BoE officials worked on improving communication.It was around this time that Bailey was forced into crisis management mode again. Truss, who had accused the BoE of failing to control inflation during the Conservative leadership campaign last summer, provoked turmoil on financial markets — notably a big sell-off in government bonds — with her September “mini” Budget involving £45bn of unfunded tax cuts.Pension funds pursuing so-called liability driven investment strategies focused on gilts were at risk of collapse, and the BoE responded by unveiling an emergency bond-buying programme.“On the financial stability side, I think [Bailey and the BoE] played a blinder in the LDI crisis,” said Bean. Bailey earned plaudits for telling pension funds there would be no extension of the central bank’s gilt-buying operation. “You’ve got three days left,” he said, urging the funds to get their investment portfolios in order.His deft handling of the crisis did not come without some issues. According to BoE insiders, he had to quell disquiet on the Monetary Policy Committee that the central bank was printing money again to buy assets, just as it had started to sell government bonds bought during quantitative easing.Bailey and the BoE are now in a much stronger position with Sunak’s government, which has studiously avoided criticising the central bank. Bailey has a close working relationship with Hunt, said Treasury insiders.

But there are challenges ahead. BoE insiders said they were concerned a narrative could develop by the end of the year that, if inflation falls very quickly, the BoE will be accused of having raised interest rates too far. Conversely, if inflation sticks at a high rate, they worry the central bank will be seen to still be behind the curve. Bailey will have to deal with the influential House of Lords economic affairs committee, which has launched an inquiry into how well BoE independence is functioning.He also has to address his goal of a more diverse staff and ending what BoE insiders say is an overly hierarchical and deferential working environment.But Jagjit Chadha, director of the National Institute of Economic and Social Research, a think-tank, summed up much external opinion in saying the BoE had performed “OK” over Bailey’s first three years as governor.He added that the effective BoE response to the market turmoil unleashed by Truss’s “mini” Budget put Bailey and the central bank in a “good position to focus on its core business [of price control and financial stability] in the years ahead”. More

LONDON (Reuters) – Switzerland’s radical pledge to bankroll Credit Suisse Group AG has won the embattled lender the chance to resurrect itself from an almost complete collapse in confidence that rattled global markets.The move, tantamount to a blank cheque from one of the globe’s leading central banks, is reminiscent of the promise by European Central Bank Mario Draghi to do whatever it takes to support the euro during the financial crash more than a decade ago.In the years that followed, the ECB and other central banks printed billions of euros, a free-money era that spawned a global rally in asset prices. A reversal of low rates to stem rampant inflation has forced a risk rethink and exposed the vulnerability of firms such as Credit Suisse.The Swiss National Bank and the country’s financial regulator, FINMA, in a joint statement on Wednesday night sought to draw a line under months of speculation about the bank’s future that had culminated in a 30% drop in its stock price on Wednesday.”If necessary the SNB will provide CS with liquidity,” they said. They played down any threat to the bank, saying the “current turmoil in the U.S. banking market” would not have any spillover for Switzerland’s banks.The move to support the group, with the pledge of central bank money, is designed to stem a crisis of confidence in Switzerland’s second-biggest lender that stems from years of scandals and losses. The collapse of Silicon Valley Bank in the U.S. on Friday prompted a widespread flight to quality that saw the bigger lenders that are deemed more solid, including Swiss rival UBS Group AG (SIX:UBSG), attract deposits, deepening Credit Suisse’s woes. It is one step short of a fully-fledged bailout like those seen during the financial crash more than a decade ago. But it leaves the central bank, which prints the Swiss franc and underpins the Alpine nation’s economy, firmly on the hook should confidence in the bank resume its spiral. Meanwhile, the bank still needs to push ahead with a radical restructuring it undertook in October to restore profitability.’AVOID CHAOS’The state rescue followed one of the worst days in the bank’s recent history, an episode that rattled the nerves of politicians and bankers around Europe, even attracting the attention of U.S. Senator Bernie Sanders.”You can only advise Switzerland to quickly organise a rescue package … to restore confidence,” said one European government source, before the announcement. “The aim has to be to avoid chaos.”The risk of contagion was so great that at least three major banks in Europe and Britain rushed to ringfence their exposure to the Swiss bank, three senior bankers told Reuters. “Credit Suisse has been in our watch-list for a while,” one senior executive told Reuters. Long troubled, the bank’s problems came to a head last year amid a social media storm of speculation that it could collapse. It has since struggled to recover after customers withdrew about $120 billion in the fourth quarter. The radical move by the Swiss central bank is aimed at banishing such doubts. Credit Suisse would be the first globally systemically important bank to receive a bespoke lifeline.But while the funding guarantees the bank’s future, it does little to address the strategic disarray at the group nor its inability to convince investors and clients that it can turn the corner.It has been seeking to restore profitability by pivoting away from investment banking and trading securities to focus on managing money for the wealthy.That plan rests on Credit Suisse being able to find backers for the investment banking division it wants to carve out, while being able to grow wealth management. Neither are a given.The bank saw revenue from trading stocks and bonds slump by 88% in the last three months of 2022 from a year earlier, in part because clients moved their business elsewhere, Reuters reported earlier in March. Within hours of the rescue, some were expressing scepticism.”The Swiss authorities will probably want to keep it on life support because of national symbolism,” said Thomas Hayes, chairman and managing member of New York-based Great Hill Capital said Hayes. “They’re going to prop this thing up and walk it around like its alive, but it will basically be a zombie bank that’s state controlled.”One UK-based equities manager said that while the backstop may stop the rout in the bank’s shares, the bank could nonetheless be forced to look at the sale of businesses such as its Swiss arm. Other analysts earlier on Wednesday said the bank could need a break-up. For weary watchers of the bank, the latest episode repeats a familiar pattern.”This has been a slow-motion train wreck for a decade now,” Hayes said. More

ZURICH/FRANKFURT (Reuters) -Switzerland’s central bank pledged on Wednesday to fund Credit Suisse with liquidity “if necessary,” a first for a global bank since the financial crisis more than a decade ago.In a joint statement with supervisor FINMA, they announced the radical step, but insisted that Credit Suisse was sound and “meets the capital and liquidity requirements imposed on systemically important banks”.The move to support the bank, with the pledge of central bank money, is designed to stem a crisis of confidence in Switzerland’s second-biggest lender. It puts the central bank on the hook, however, should confidence in the bank continue to tumble.The bank’s stock had plunged more than 30% on Wednesday, following months of turmoil. Governments and at least one bank put pressure on Switzerland to act, according to people familiar with the matter.The SNB and FINMA sought to underpin confidence in the bank, saying that “there are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the U.S. banking market.””We welcome the statement of support,” Credit Suisse said.The Swiss lender would be the first globally systemically important bank to receive a bespoke lifeline, compared with liquidity offered by central banks to the financial sector generally in times of extreme market stress, such as when economies went into lockdown to combat COVID-19.Shares in Credit Suisse, which is battling to recover from a string of scandals, have taken a hammering over the last 12 months. The stock was worth around 80 Swiss francs in 2008, but had dwindled to 1.55 Swiss francs on Wednesday.The latest fall was triggered when its largest shareholder, Saudi National Bank, said it could not provide further financial help for the embattled lender. Wealthy clients had already pulled billions from the bank.Credit Suisse is in the midst of a major overhaul, cutting costs and jobs and creating a separate business for its investment bank.CEO Ulrich Koerner had earlier sought to calm nerves, saying the bank’s liquidity was strong. On Tuesday it suffered a fresh setback when it published its annual report for 2022, identifying “material weaknesses” in controls over financial reporting.The report had been delayed last week following a last-minute call from the U.S. Securities and Exchange Commission (SEC), which raised questions with the bank. More