Swiss sight deposits jump, suggesting Credit Suisse, UBS took emergency liquidity

ZURICH – Sight deposits held by the Swiss National Bank (SNB) jumped last week, data showed on Monday, suggesting that both Credit Suisse and UBS may have taken big chunks of emergency liquidity to secure their merger.

Sight deposits – cash held by the SNB for commercial banks overnight – jumped to 567 billion Swiss francs ($619 billion) from 515 billion francs a week earlier.

The 52 billion franc increase was the second-highest on record, just behind a 52.4 billion franc leap in August 2011 when the SNB was selling huge amounts of francs to relieve pressure on the safe-haven currency.

Last week’s rise indicates that both UBS and Credit Suisse may have used some of the 200 billion francs in extra liquidity offered by the SNB as part of a state-sponsored rescue of Credit Suisse.

UBS agreed to buy Credit Suisse for 3 billion Swiss francs in stock in a merger engineered to avoid more market-shaking turmoil in global banking.

Credit Suisse had already said it would take 50 billion francs from the SNB under its emergency liquidity assistance (ELA) facility before the UBS takeover.

As part of the rescue, another 100 billion francs was offered by the central bank to both UBS and Credit Suisse under an extended version of the ELA scheme, while Credit Suisse also had access to 100 billion francs under a public liquidity backstop.

The SNB declined to comment on Monday on the use of the facilities. Credit Suisse and UBS also both declined to comment.

“The increase is likely to be a result of Credit Suisse using the extra liquidity offered by the SNB, and could also include UBS using the facility too,” said Karsten Junius, an economist at J.Safra Sarasin.

“How much exactly is difficult to say, but all banks could also be increasing liquidity at the moment.”

Credit Suisse tapped the Swiss National Bank for “a large multi-billion amount” last weekend to secure its liquidity, the country’s finance minister Karin Keller-Sutter told Swiss broadcaster SRF on Saturday.

She said this was because customers had again withdrawn money but also because counterparties were demanding guarantees when doing business with the bank.

($1 = 0.9166 Swiss francs)