Credit Suisse to borrow $54 billion from Swiss central bank

Switzerland-based global investment bank and finance company Credit Suisse AG announced on Thursday they will borrow 50 billion Swiss francs (€50.7 billion, $54 billion) from the country’s central bank in a move aimed at strengthen its liquidity and deposit reserves.

It also made a buyback offer for $2.5 billion in US debt and €500 million in European debt.

“These steps demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value for our clients and other stakeholders,” said the investment firm’s CEO, Ulrich Körner.

The moves come amid a sharp drop in Credit Suisse’s share price, which has triggered heightened fears of a broader crisis in bank deposits.

The decision to borrow from the Swiss National Bank (SNB) makes Credit Suisse the first major global bank to extend that lifeline since the 2008 global financial crisis. capital and liquidity requirements imposed on systemically important banks” and which could access central bank liquidity if needed.

Central banks around the world have provided general banks with liquidity during periods of market turmoil, including that induced by the COVID pandemic.

What triggered the liquidation?

Credit Suisse shares fell as much as 30% on Wednesday, triggered by a Bloomberg TV interview in which Mr. al-Khudairy of the Saudi National Bank – Credit Suisse’s biggest shareholder – said he would “absolutely not” put more liquidity in the bank. He later clarified that his firm stance was to comply with regulatory rules and statutory limitations.

The market, already on edge after the collapse last week of two midsize US companies, Silicon Valley Bank and Signature Bank, continued to sell Credit Suisse shares despite assurances that the bank had a strong liquidity base. with a 150% cash deposit fee. A cash deposit ratio is the amount of cash a bank should have on hand as a percentage of the total amount of cash its customers have deposited with the bank.

Meanwhile, two supervisory sources told Reuters news agency that the European Central Bank had contacted banks under its supervision to question them about their exposures to Credit Suisse. The US Treasury also said it is monitoring the situation around Credit Suisse and is in contact with global counterparties, according to a Treasury spokesperson.

mk/sms (Reuters, AFP)