This is where deducted CS money deposits from customers flowed. The European Commission wants more transparency for small investors

Julius Baer shareholders had long faces on Tuesday. The course of events in the first four months of the current year made it clear that the asset management bank Zurich, contrary to the expectations of many investors, was unable to profit or hardly benefit from the Credit Suisse crisis. Julius Baer recorded an inflow of customer deposits of only CHF 3.5 billion compared to the end of 2022. That is an increase of only 1 percent.

The sharp price drop shows that investors had expected much more. Julius Baer shares lost up to 8 percent of their previous day’s value in the first few minutes of trading on the Six Swiss Exchange on Tuesday morning. The banks operating in the Swiss financial center will soon have to get used to such sobering experiences.

The runoff accelerated dramatically in March

The Swiss National Bank’s monthly bank statistics, updated at the beginning of the week, allow the first fairly reliable forecasts of the damage caused by the Credit Suisse bankruptcy for the Swiss financial center – and the statistics show that the damage in the three-digit billion range.

In fact, the figures show that about half of the customer deposits lost by the bankrupt major bank between October 2022 and March 2023 came under the influence of other financial centers abroad. The Swiss banking statistics record the deposits of customers of banks in Switzerland that are located in Switzerland or abroad. The deposits of customers of branches of these banks abroad are also registered.

The statistics now clearly show how Credit Suisse customer deposit withdrawals (the statistics combine Credit Suisse along with UBS as a group of major banks) accelerated dramatically again in March.

In that month alone, when Credit Suisse’s final with the central bank’s first liquidity injection on March 15 became a public spectacle that could no longer be hidden, let alone embellished, the two big banks (or Credit Suisse) lost another 69 billion francs. .

A pattern that became visible immediately after the start of the escalation of the Credit Suisse crisis in October 2022 was clearly visible again in March. Withdrawals by Credit Suisse clients residing abroad far outstripped withdrawals by domestic clients.

The interesting question now is where did the money withdrawn from Credit Suisse go. The National Bank’s statistics also provide insightful information on this. This makes it clear that the Swiss cantonal banks, which have a state guarantee, are the biggest beneficiaries of the crisis of the big banks. Between the end of September 2022 and the end of March 2023, the 24 state institutions were able to book about 24 billion francs in new customer deposits. This corresponds to a growth of 5.5 percent, compared to an average decline of customer deposits of all banks operating in Switzerland of 11 percent.

Apart from the cantonal banks, no other group of banks in Switzerland has been able to record a significant increase in customer deposits since the end of September 2022 – not even the regional banks and the Raiffeisenbanken, which are well established with the general public. The Credit Suisse effect was also not noticeable at the Swiss private banks, which appear in the statistics in the group of listed banks and to which Julius Baer also belongs.

On the contrary, customer deposits at these listed banks have fallen by CHF 22 billion to CHF 163 billion since the end of September, which probably has a lot to do with a changed interest rate environment and the depreciation of foreign currencies against the Swiss franc.

The rise in interest rates since September 2022 has increased the attractiveness of fixed income investments and encouraged the shift from account deposits to securities investments. This can also be seen very clearly in the statistics by the enormous increase in investments in money market funds (see chart). Unlike normal deposits, money market investments directly reflect the current interest rate level.

Removed and saved

Such money market investments are therefore particularly suitable for the temporary storage of funds that an investor has not yet decided will be used for the longer term. There are also voices in Swiss private banking circles that many Credit Suisse clients have temporarily parked the money from the emptied accounts on the money market, thereby removing the risk from the CS balance.

In fact, National Bank statistics show that money market investments by customers of banks in Switzerland in Swiss custodial accounts have more than doubled since the end of September from just under CHF 94 billion to over CHF 214 billion.

The private bankers assume that the majority of these money market investments will remain with them. But even assuming this is actually the case, Credit Suisse is left with a CHF 93 billion difference after the cash outflow. No clear statement can be made about their geographical whereabouts.

However, the much disproportionate amount of money withdrawn by Swiss clients of large banks living abroad suggests that these funds ended up with foreign banks in financial centers outside Switzerland. It is clear that the debacle with Credit Suisse has wreaked havoc on the Swiss financial centre. In addition to the loss of image, which is difficult to quantify, there are now about 100 billion francs in lost customer assets. (aargauerzeitung.ch)