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Large traders are confident the historic downfall of Credit Suisse will not result in a deeper crisis, playing down suggestions of wider negative effects across the commodities sector.

Switzerland’s financial sector has been rocked by the chaos engulfing the 167-year-old lender. On March 17, a US$54bn liquidity injection from the central bank failed to stem the outflow of cash from Credit Suisse, and within hours authorities stepped in to coordinate a takeover by rival UBS. 

Coupled with the failure of San Francisco-based Silicon Valley Bank just days earlier, fears have arisen that the banking sector could be on the cusp of a fresh financial crisis. However, large commodity traders have been quick to downplay those risks. 

“It certainly doesn’t feel like that,” said Jeff Dellapino, Vitol’s chief financial officer, speaking alongside several trading giants at this week’s FT Commodities Global Summit in Lausanne. “The information that we can see on banks in terms of regulatory supervision and capital all feels very orderly.  

“Obviously the events of last week were a bit shocking… [but] we’re not getting any sort of impact feedback from any of our banks.” 

Guillaume Vermesch, group chief financial officer at Mercuria, suggested the situation may prove an issue for Switzerland’s status as a global financial centre, but said: “I don’t think it will be an issue on the financing side for people on the stage today.” 

Christophe Salmon, chief financial officer at Trafigura, added the capital-intensive nature of the commodities sector means traders could present a lifeline to a struggling lender. 

“The type of assets that we can bring to a bank’s balance sheet is exactly what the bank needs,” he said.  

“Banks are financing our working capital, inventories, receivables payments, which are intrinsically short-term assets. These assets have paid the lowest floating rates, so there is no interest rate mismatch between the assets and the liability of the bank. I don’t see an issue there.” 

And Richard Dolcetti, chief financial officer at Castleton Commodities International, agreed the Credit Suisse turmoil “doesn’t feel like it really is anything that can cascade” to the banking sector more widely. 

“The incidents we’ve seen, mostly, have been around a lack of competence in certain institutions, for whatever reason,” he said. “The banks are pretty well capitalised, in my understanding, but when you start to have a lack of confidence in an institution it becomes a problem”. 

Jeff Currie, global head of commodities research at Goldman Sachs, said earlier at the same event: “Credit Suisse had a lot of problems going into this and I think what’s happened here, over the last couple of days, it’s been isolated. Europe, we can say, is relatively safe. Banks are well capitalised.” 

The picture may be slightly different for smaller commodity traders, however. 

Mercuria’s Vermesch noted there is “probably more concern on the trading side for smaller, niche traders, or more generally for SME companies in Switzerland, which are typically reliant on these two banks to function”.  

“Businesses there may be more on the spot,” he said. 

Speaking to GTR on the sidelines of the event, one smaller European trading house said it has not been informed of any immediate changes to its trade finance lines from Credit Suisse. 

But there are concerns for traders that have historically had similarly sized financing lines from both Credit Suisse and UBS. Industry insiders say it is uncertain whether a combined banking entity would fully incorporate both lines, effectively doubling the size of the facility. 

Jeff Webster, group chief financial officer at Gunvor, said the Swiss government “may, having solved one problem, just opened up just as many new ones”, including the implications for the country of having “one mega-bank controlling that portion of the market”.