Credit Suisse provides $54 billion lifeline

CREDIT Suisse announced on Thursday it will borrow up to $53.7 billion from the Swiss central bank in a bid to calm markets after its shares plunged on fears of a global banking crisis.

Switzerland’s second-biggest bank, already mired in a string of scandals, came under pressure this week as the bankruptcy of two regional US creditors rocked the sector.

Hours before European stock markets were due to open, Credit Suisse released a statement saying it was “taking decisive action to proactively bolster its liquidity” by exercising an option to borrow up to CHF50 billion from the central bank.

He also announced a debt buyout worth up to 3 billion francs.

“These actions demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to benefit our clients and other stakeholders,” said CEO Ulrich Kerner.

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“My team and I are determined to move forward quickly to create a simpler, more focused, customer-focused bank.”

The bank’s shares fell 24 percent on Wednesday after its main shareholder, the National Bank of Saudi Arabia, said it would not increase its stake in the group due to regulatory restrictions.

The bank already suffered earlier this week when its annual report found “significant deficiencies” in internal controls.

The Swiss National Bank said late Wednesday that the lender’s capital and liquidity levels are adequate for a “systemically important bank” even as it pledged to provide liquidity if needed.

Credit Suisse is one of 30 banks in the world deemed too big to fail, forcing it to save more money to get through the crisis.

Analysts warn of rising concerns over the bank’s viability and impact on the sector as a whole, as shares in other lenders fell on Wednesday after rebounding the day before.

Markets have been rocked this week following the bankruptcy of technology industry lenders Silicon Valley Bank (SVB) and Signature Bank.

The demise of the SVB was caused by the US Federal Reserve’s rate hike campaign, which lowered the value of lower-yielding bonds held by the California bank, causing it to lose $1.8 billion.

On Thursday, Credit Suisse said its bond portfolio is “fully immune to changes in interest rates.”

In February 2021, Credit Suisse shares were worth 12.78 Swiss francs, but since then the bank has faced a series of problems that have eroded its market value. He was hit by the collapse of the American Archegos Foundation, which cost him more than $5 billion.

Its wealth management arm was rocked by the bankruptcy of the British financial firm Greensill, which was invested with about $10 billion through four funds.

The bank recorded a net loss of 7.3 billion Swiss francs for the 2022 financial year.

This came amid a run on funds by its clients, including in the asset management sector, one of the activities the bank intends to refocus on as part of a major restructuring plan.