Credit Suisse to borrow $54bn from Swiss central bank.
Credit Suisse says it will borrow up to 50 billion Swiss francs ($54 billion; £44.5 billion) from the Swiss central bank to shore up its finances.
As part of its efforts to become a simpler bank, the lender announced it was taking decisive measures to strengthen its liquidity.
Credit Suisse shares fell 24% on Wednesday after the company disclosed “weakness” in its financial reporting.
This resulted in widespread selling on European markets and fears of a more widespread financial crisis.
Credit Suisse stated that its borrowing actions represented “decisive action to strengthen [the bank]”
Ulrich Koerner, the chief executive officer of Credit Suisse, said in a statement, “My team and I are committed to moving swiftly to deliver a simpler and more client-centric bank.”
The collapse of Silicon Valley Bank, the nation’s sixteenth-largest bank, was followed by the failure of Signature Bank two days later to reveal problems in the banking sector in the United States.
After Credit Suisse stock plummeted on Wednesday, a major investor, the Saudi National Bank, announced that it would not invest additional capital in the Swiss bank.
All major indexes fell sharply as the fears spread throughout the financial markets.
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Capital Economics’ Andrew Kenningham wrote, “The problems at Credit Suisse once again raise the question of whether this is the beginning of a global crisis or just another ‘idiosyncratic’ case.”
The Swiss National Bank, the country’s central bank, and the Swiss Financial Market Supervisory Authority expressed their willingness to assist Credit Suisse if necessary to allay investor concerns.
Swiss financial institutions are subject to stringent regulations to “ensure their stability,” and Credit Suisse meets the requirements for systemically significant banks, according to regulators.
“There are no indications that Swiss institutions face a direct risk of contagion from the current turmoil in the U.S. banking market,” they said in a joint statement.
According to the BBC, the Bank of England has contacted Credit Suisse and Swiss authorities to monitor the situation.
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Credit Suisse, which was founded in 1856, has been involved in a series of scandals in recent years, including allegations of money laundering and other issues.
It lost money in 2021 and 2022 – its worst years since the 2008 financial crisis – and has warned that it does not anticipate turning a profit until 2024.
Before this week, the company’s shares had already taken a severe beating, with their value falling by roughly two-thirds over the past year as investors withdrew funds.
Tuesday’s disclosure by the bank of “material weaknesses” in its financial reporting controls rekindled investor apprehensions.
The situation worsened when the chairman of the Saudi National Bank, Credit Suisse’s largest shareholder, stated that the bank would not purchase additional shares for regulatory reasons.
At the time, Credit Suisse insisted that its financial standing was not a cause for concern. However, the lender’s shares closed Wednesday 24% lower as other banks rushed to reduce their exposure to the company and the prime ministers of Spain and France attempted to allay fears.
This comes after Silicon Valley Bank (SVB), which specialized in lending to technology companies, was shut down by US regulators on Friday, marking the largest bank failure in the United States since 2008. HSBC acquired the UK division of SVB for £1.
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Following the failure of SVB, the New York-based Signature Bank also failed, with US regulators guaranteeing all deposits at both institutions.
Nonetheless, concerns have persisted that other banks may encounter similar difficulties, and the trading of bank stocks has been volatile this week.
On Wednesday, the Stoxx Europe banking stock index fell 7%.
In the United States, shares of both small and large banks were affected, contributing to a drop of nearly 0.9% in the Dow and 0.6% in the S&P 500.
The FTSE 100 index in the United Kingdom fell by 3.8%, or 293 points, the largest one-day drop since the beginning of the pandemic in 2020.
“This banking crisis began in the United States. People are now watching to see if the situation could also cause problems in Europe “Robert Halver, head of capital markets at Baader Bank in Germany, stated as much.
“If a bank has had even the slightest problem in the past, and if major investors say we don’t want to invest and don’t want new money flowing into this bank, then, of course, a story is being told that many investors want to get out,”
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