Credit Suisse’s fatal bank run points to gaps in liquidity rules

There’s a growing consensus that previous estimates putting the so-called runoff rate as low as 10% among retail deposits is obsolete. — Bloomberg

FRANKFURT: Credit Suisse AG was hit by renewed outflows over several days last month that took it to the brink of bankruptcy, even when it was supposed to have enough funds to cover a month of deposit flight.

As Swiss officials and Credit Suisse executives emphasised that the firm’s emergency sale staved off imminent collapse, they highlighted how sharp the run was. The bank had 120 billion francs (RM583.3bil) at the end of December to cover the 83 billion francs (RM403.4bil) of net outflows it expected over a brutal 30 days, and said that as of March 14, that ratio had improved. But just a few days later, it was on the brink. That’s thrown into the spotlight just how prepared lenders are to weather a crisis and return money to depositors on demand. Swiss finance minister Karin Keller-Sutter and Marlene Amstad, head of Swiss financial watchdog Finma, both indicated that Credit Suisse was teetering on the brink of bankruptcy at the time of its government-backed rescue on March 19.