Embattled Credit Suisse gets $ 54 b lifeline from Swiss central bank

Friday, 17 March 2023 00:42 -     - {{hitsCtrl.values.hits}}

ZURICH, AFP: Credit Suisse announced Thursday that it would borrow up to $ 53.7 billion from the Swiss central bank as it seeks to calm markets after its shares sank over fears of a global banking crisis.

Switzerland’s second biggest bank, already mired in a slew of scandals, has come under pressure this week as the failure of two US regional lenders has rocked the sector.

Hours before European stock markets were due to open, Credit Suisse issued a statement saying it was “taking decisive action to preemptively strengthen its liquidity” by exercising its option to borrow up to 50 billion Swiss francs from the central bank.

It also announced a debt buyback of up to 3 billion francs.

“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” CEO Ulrich Koerner said in the statement.

“My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs.” The bank’s shares cratered by 24% on Wednesday after its main shareholder, Saudi National Bank, said it would not raise its stake in the group due to regulatory constraints.

The bank had already taken a hit earlier in the week when its annual report acknowledged “material weaknesses” in internal controls.

The Swiss National Bank said late Wednesday that capital and liquidity levels at the lender were adequate for a “systemically important bank”, even as it pledged to make liquidity available if needed.

Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.

Credit Suisse said in Thursday statement that the central bank loan would “support... core businesses and clients”.

Markets have been rocked this week following the implosions of tech industry lenders Silicon Valley Bank and Signature Bank.

SVB’s demise was precipitated by the US Federal Reserve’s interest rate-hike campaign, which brought down the value of bonds with lower returns that the California bank held, causing it to lose $ 1.8 billion.

Credit Suisse said Thursday that its bond portfolio was “fully hedged for moves in interest rates”.

Asian markets slid on Thursday, led again by banks.