Credit Suisse borrows CHF 50 billion to avert liquidity crisis
Swiss bank Credit Suisse confirmed on Thursday its decision to borrow CHF 50 billion from the Swiss National Bank (SNB) to prevent liquidity issues and ease investor fears after the lender’s shares plummeted 30% on Wednesday.
The lifeline thrown by the SNB in an unprecedented move, will support Credit Suisse’s core businesses and clients and help the lender “meet capital liquidity requirements applicable to Swiss financial institutions ensure their stability”.
The move comes after the sudden collapse of US-headquartered Silicon Valley Bank affected banks worldwide in a crisis of confidence among investors. The downfall of SVB was followed by aother US lender, Signature bank, only two days later which sent banks on a rollercoaster ride on the stock market.
In the US, the government took emergency steps to give banks more funding to weather the crisis. On Wednesday, however, the focus shifted to Europe, where Credit Swisse falling shares took down the European banking index.
Credit Suisse is the first major global bank to receive such an emergency lifeline since the financial crisis in 2008. The Swiss Financial Market Supervisory Authority (FINMA) and the SNB came out in a joint statement on Wednesday, saying the bank could have access to more liquidity “if necessary”. Furthermore, the regulatory statement highlighted that “Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks.”
The Swiss financial markets regulators tried to ease investor concerns saying that the US banking crisis does not pose a direct risk to Swiss institutions.
According to Reuters, the European Central Bank has reached out to banks to discuss their exposures to Credit Suisse. The US Treasury is also keeping an eye on Credit Suisse’s situation.