March 2, 2024

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Credit Suisse borrows more than $50 billion from the Swiss National Bank after shares collapse by 30%

Credit Suisse borrows more than $50 billion from the Swiss National Bank after shares collapse by 30%

London (CNN) Hours after the Swiss central bank said it was ready to provide financial support to Credit Suisse, the beleaguered mega-bank accepted the offer, hoping to reassure investors that it has the liquidity needed to stay afloat.

Credit Suisse said it would borrow up to 50 billion Swiss francs ($53.7 billion) from the Swiss National Bank. Investors caused shares in the country’s second-largest lender to crash by as much as 30% on Wednesday.

The bank described the loan as “a decisive measure to proactively enhance liquidity”.

“This additional liquidity will support the core business of Credit Suisse’s clients as Credit Suisse takes the necessary steps to create a simpler, more focused bank built around clients’ needs,” the bank said in a statement.

In addition to the loan from the central bank, Credit Suisse also said it had bought back billions of dollars of its debt to manage its liabilities and interest payments. The offer covers $2.5 billion in dollar bonds and 500 million euros ($529 million) in euro bonds.

Founded in 1856, the venerable and troubled bank is one of the world’s largest financial institutions and ranks as a “systemically important global bank,” along with just 30 other banks, including JP Morgan Chase, Bank of America, and Bank of China.

Asian stocks fell sharply at the start of the day Thursday, but bounced off their lows after Credit Suisse’s move, amid jubilation at the bank’s determination to restore confidence in its operations.

Earlier on Wednesday, in a joint statement with Swiss financial market regulator FINMA, the Swiss National Bank (SNB) said Credit Suisse (CS) had met “strict capital and liquidity requirements” imposed on banks of importance to the broader financial system.

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“If necessary, the SNB will provide liquidity to the CS with liquidity,” they said.

actually On the brink after the failure of the Silicon Valley bank In the United States last week, investors dumped stocks in A beleaguered Swiss bank Earlier in the day, it dropped them to a new record low after its biggest backer appeared to rule out offering any further funding.

The Swiss authorities said in their statement that the problems of “certain banks in the United States do not pose an immediate risk of contagion to Swiss financial markets”.

“There are no indications of a direct risk of contagion to Swiss institutions due to the current turmoil in the US banking market,” the statement continued.

Saudi backers are “not inclined” to increase funding

The Chairman of the Board of Directors of the National Bank of Saudi Arabia – Credit Suisse’s largest shareholder, after the capital increase last fall – said earlier Wednesday that he will not increase his stake in Credit Suisse.

“The answer is certainly not for many reasons,” Ammar al-Khudairi told Bloomberg on the sidelines of a conference in Saudi Arabia. “I will mention the simplest reason, which is regulatory and legislative. We now own 9.8% of the bank – if we go over 10%, all kinds of new rules will apply, whether it be our regulator, the European regulator or the Swiss regulator.” “We don’t tend to get into a new regulatory regime.”

Once a major player on Wall Street, Credit Suisse has been subjected to a series of missteps and Compliance failure Over the past few years they have damaged their reputation with clients and investors, and cost many senior executives Careers.

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Customers withdrew 123 billion Swiss francs ($133 billion) from Credit Suisse last year — most of it in the fourth quarter — and the bank posted a net annual loss of nearly 7.3 billion Swiss francs ($7.9 billion), its biggest loss since the global financial crisis in 2008. .

In October, the bank embarked on a “radical” restructuring plan that includes cutting 9,000 full-time jobs, breaking up the investment bank and focusing on wealth management.

Al-Khudairi said he was happy with the restructuring, adding that he did not think the Swiss lender would need additional funds. Others are not so sure.

Credit Suisse may no longer have enough capital to absorb losses in 2023 because its funding costs have become prohibitive, said Johann Schultz, European banking analyst at Morningstar.

“To stem customer outflows and ease the anxiety of wholesale finance providers, we believe that Credit Suisse needs other rights [share] He commented on Wednesday. “We think the alternative would be a break-up … with the sale of the healthy businesses – the Swiss bank, asset management, wealth management and possibly some parts of the investment banking business – or sold separately listed.”

It is not just a Swiss problem

Shares of the bank last fell 24% in Zurich on Wednesday, and the cost of buying credit default insurance for Credit Suisse hit a new record, according to S&P Global Market Intelligence.

The collapse extended to other European bank stocks, as French and German banks such as BNP Paribas, Societe Generale, Commerzbank and Deutsche Bank fell between 8% and 12%. Italian and British banks also fell.

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Two supervisory sources told Reuters that the European Central Bank had contacted the banks to question them about their exposure to Credit Suisse. The European Central Bank declined to comment.

While the problems at Credit Suisse were widely known, with assets of around 530 billion Swiss francs ($573 billion), they represented a much bigger potential headache.

“[Credit Suisse] “Credit Suisse is not just a Swiss problem, it’s a global problem,” writes Andrew Kenningham, chief European economist at Capital Economics.

The blows continue to face Switzerland’s second largest bank. And on Tuesday I confessed.physical weaknessin its financial reports and cancel bonuses for senior executives.

Credit Suisse said in its annual report that it found that “the group’s internal control over financial reporting was ineffective” because it failed to adequately identify potential risks to the financial statements.

The bank is urgently developing a “remedial plan” to strengthen its controls.

Speaking to Bloomberg TV on Tuesday, Credit Suisse CEO Ulrich Korner said the bank saw “physically good inflows” of money on Monday, even as markets were spooked by the collapse of SVB and Signature in the US.

Korner added that outflows from the bank were “significantly moderate” after customers withdrew 111 billion francs ($122 billion) in the three months to December. The bank said in its annual report that outflows did not decline until the end of last year.

Olesya Dmitrakova and Levi Doherty contributed to this article.