Banking giant Credit Suisse said on Thursday it will borrow $54 billion from Switzerland’s central bank, the latest move by authorities to calm investors and ease mounting fears of a global banking crisis.
The move to prop up Switzerland’s second-biggest commercial bank sent its shares soaring as markets reacted well in Europe and the United States. It was a marked change from the previous day, when Credit Suisse shares tumbled and intensified fears of a possible run on bank deposits following the collapse of two US banks last week.
«These steps demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,» CEO Ulrich Koerner said. said in a statement which was published in the middle of the night in Zurich.
Markets responded well to the news, with futures rising in London, Frankfurt and Wall Street. Bank stocks were up across the board, with Credit Suisse shares settling for a gain of around 23% after an initial 30% rise.
However, trading was volatile in the Asian markets.
“What we have seen overnight is the Swiss central bank saying ‘no, we will not let this turn into a disorderly collapse,’” Sir John Gieve, former deputy governor of the Bank of England, told BBC News.
The deal comes after Credit Suisse led a sell-off in bank shares as its share price hit a record low on Wednesday, fueling fresh fears about the health of global banks following the collapse of Silicon Valley Bank and Signature Bank in USA
Credit Suisse’s longstanding problems were compounded when its largest investor, the National Bank of Saudi Arabia, said it could not provide further financial assistance because it was wary of the regulatory controls that would be kicked in.
On Thursday, the bank’s president, Ammar Al Khudairy, said the market turmoil in the Swiss lender’s shares was “unwarranted”.
“If you look at how the entire banking sector has gone down, unfortunately, a lot of people were just looking for excuses,” Al Khudairy told CNBC’s Hadley Gamble. “It’s panic, a little panic. I think it’s completely unjustified, either for Credit Suisse or for the whole market,” he said.
Credit Suisse’s action on Thursday is the first major international bank to receive such a lifeline since the 2008 financial crisis, and the move could raise questions about how banks will navigate rising inflation around the world. Last month, Credit Suisse reported its biggest annual loss since that crisis.
Troubles at the bank, founded in 1856 and one of the world’s largest, have shifted the gaze of the financial world from the United States to Europe.
Silicon Valley Bank, the US tech sector’s favorite lender, shut down last week, prompting federal authorities to guarantee all its deposits. Two days later, New York regulators close Signature Banka large lender in the cryptocurrency industry.
«The problems at Credit Suisse once again raise the question of whether this is the start of a global crisis or just another ‘idiosyncratic’ case,» Andrew Kenningham of Capital Economics, a London-based economic forecaster, said in a note from investigation on Wednesday. , before the Credit Suisse deal was announced.
Political leaders in countries like Australia and South Korea have tried to reassure investors that their banks are well capitalized and are not facing a crisis.
While Credit Suisse has had its own problems other than the problems that brought down SVB and Signature, analysts said higher interest rates in the US and abroad have put pressure on asset values in power of lenders around the world.
The Swiss bank, which has struggled with weak profitability in recent years, warned on Tuesday that a recent stream of customers withdrawing their money it had slowed but “had not yet reversed”. The acknowledgment coincided with the disclosure that Credit Suisse had found «material weaknesses» in its financial reports for 2021 and 2022.
The bank has faced one scandal after another in recent years. Was convicted in connection with a money laundering plot involving a drug ring last summer. And she has had substantial entanglements with a collapsed hedge fund and a bankrupt british lender.
rob wile and Reuters contributed.