ZURICH (AFP) – Credit Suisse announced yesterday that it would borrow up to USD53.7 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 United States (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 CHF50 billion from the central bank.
It also announced a debt buyback of up to CHF3 billion. “These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” Chief Executive Officer Ulrich Koerner said in the statement.
“My team and I are resolved to move forward rapidly to deliver a simpler and more focussed bank built around client needs.”
The bank’s shares cratered by 24 per cent 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 on 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 yesterday’s statement that the central bank loan would “support… core businesses and clients”.
Analysts have warned of mounting concerns over the bank’s viability and the impact on the wider sector, as shares of other lenders sank on Wednesday after a rebound the day before.
Markets have been rocked this week following the implosions of tech industry lenders Silicon Valley Bank (SVB) 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 USD1.8 billion.
Credit Suisse said yesterday that its bond portfolio was “fully hedged for moves in interest rates”.
Asian markets slid yesterday, led again by banks.
In February 2021, Credit Suisse shares were worth CHF12.78, but since then, the bank has endured a barrage of problems that have eaten away at its market value.
