Switzerland-based global investment bank and financial firm Credit Suisse AG early on Thursday said it will borrow 50 billion Swiss francs (€50.7 billion, $54 billion) from the country’s central bank in a move meant to strengthen its liquidity and deposit reserves.
It also made a buyback offer on $2.5 billion worth of US debt and €500 million in European debt.
“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” said the investment firm’s Chief Executive Officer, Ulrich Körner.
The steps come during a severe slump in Credit Suisse’s share price that triggered larger fears of a broader bank deposit crisis.
The move to borrow from the Swiss National Bank (SNB) makes Credit Suisse the first major global bank to be extended such a lifeline since the 2008 global financial crisis. Swiss authorities on Wednesday said Credit Suisse met “the capital and liquidity requirements imposed on systemically important banks” and that it could access central bank liquidity if needed.
Central banks across the world extended liquidity to banks in general during periods of market turmoil, including that induced by the COVID pandemic.
What triggered the selloff?
Credit Suisse’s stock fell as much as 30% on Wednesday triggered by a Bloomberg TV interview where Mr. al-Khudairy of the Saudi National Bank — Credit Suisse’s largest shareholder — said it would “absolutely not” push more liquidity into the bank. He later clarified that his staunch position was to abide by regulatory rules and statutory limitations.
The market, already on edge from last week’s collapse of two mid-size US firms Silicon Valley Bank and Signature Bank, continued to sell Credit Suisse shares despite reassurance that the bank had a strong liquidity base with a 150% cash deposit ratio. A cash deposit ratio is the amount of money a bank should have available as a percentage of the total amount of money its customers have deposited in the bank.
Meanwhile, two supervisory sources told Reuters news agency that the European Central Bank had contacted banks on its watch 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 touch with global counterparts, according to a Treasury spokesperson.
mk/sms (Reuters, AFP)
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