Write-down fears weigh on Credit Suisse

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The Independent Online

Shares in Credit Suisse fell yesterday amid concerns that it will make big write-downs on potential losses caused by the credit crunch, as analysts warned that banks would need to increase their capital buffers.

Credit Suisse shares fell by 2.6 per cent after a Swiss newspaper reported that the bank would make a SFr 2.5bn (1.1bn) write-down for the fourth quarter on its leveraged loans and commercial mortgages business. Analysts cast doubt on the details but said the bank could face write-downs and take assets on to its balance sheet from a money market fund which went sour.

Credit Suisse has until now been relatively unscathed by the US sub-prime mortgage crisis and the credit crunch. Its bigger rival, UBS, has been one of the worst-hit banks after a late charge into complex credit markets that forced the resignation of its chief executive.

The credit rating agency, Moody's, warned that banks would need or regulators would impose bigger capital buffers to offset the risk of losses on collateralised debt obligations (CDOs) and other opaque credit products whose values had plunged.

"The combination of financial innovation, opacity and leverage is generally explosive. More capital buffers will be needed or required by counter-parties and regulators," Moody's reported.

Standard & Poor's hinted that it could lower ratings on about $6.42bn ($3.25bn) of US cashflow and hybrid CDOs of asset-backed securities. The agency put on negative watch the ratings of 149 tranches from 43 transactions.

In Britain, building societies hit back at suggestions that they were virtually excluded from wholesale funding markets. Adrian Coles, the director-general of the Building Societies Association, said more than 40 of the country's 59 societies raised funds in the markets in December and those that did not do so had no need for it. A report by the CBI and PricewaterhouseCoopers had said building societies were struggling to raise funds. Sterling inter-bank lending rates continued to fall yesterday after central banks took action last month to unglue the markets. Jean-Claude Trichet, president of the European Central Bank, said he and other central bankers were "very satisfied" with the effectiveness of their actions so far.

The crunch claimed fresh victims as Canadian Imperial Bank of Commerce ousted its senior investment banker Brian Shaw and chief risk officer Ken Kilgour after writing down $3bn of debt.

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