Credit Suisse secures $54 billion lifeline to ease fears of global banking crisis

banking giant Swiss credit announced on Thursday that it would borrow $54 billion from the Swiss central bank, the latest move by authorities to calm investors and ease growing fears of a global banking crisis.

The decision to consolidate Switzerland’s second-largest commercial bank saw its shares soar as markets reacted well in Europe and the United States. It was a sharp reversal the day before, when Credit Suisse shares tumbled and heightened fears of a possible run on bank deposits after two US banks collapsed 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 press release which was released in the middle of the night in Zurich.

Markets reacted well to the news, with futures rising in London, Frankfurt and Wall Street. Banking stocks rose across the board, with Credit Suisse shares coming in at around a 23% gain after an initial 30% rise

Trading was volatile in Asian markets, however.

“What we saw overnight was that the Swiss central bank said ‘no, we won’t let this go into a disorderly collapse,'” said Sir John Gieve, the Bank’s former deputy governor. of England, to BBC News.

The deal comes after Credit Suisse led a sell-off in bank stocks as its share price hit a record high on Wednesday, fueling fresh fears about the health of global banks in the wake of the collapse. Silicon Valley Bank and Signature Bank in the United States.

Credit Suisse’s longstanding problems were compounded when its largest investor, the Saudi National Bank, said it could not provide more financial aid because it was wary of regulatory controls that would come into effect.

On Thursday, the bank’s chairman, Ammar Al Khudairy, said the turmoil in the Swiss lender’s stock market was “unwarranted”.

“If you look at how the whole banking industry went 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 unwarranted, whether it’s for Credit Suisse or for the market as a whole,” he said.

Thursday’s action by Credit Suisse is the first major international bank to benefit from such a lifeline since the 2008 financial crisis, and the move could raise questions about how banks will deal with rising inflation around the world. Last month, Credit Suisse announced its biggest annual loss since the crisis.

The problems of the bank, founded in 1856 and one of the largest in the world, have shifted the gaze of the world of finance from the United States to Europe.

Silicon Valley Bank, America’s preferred technology lender, close last week, leading federal authorities to guarantee all its deposits. Two days later, New York regulators close Signature Banka major lender in the cryptocurrency industry.

“Credit Suisse’s problems once again raise the question of whether this is the start of a global crisis or just another ‘idiosyncratic’ case,” said Andrew Kenningham of Capital Economics, a forecaster. London-based economics, in a research note Wednesday. , before the announcement of the agreement with Credit Suisse.

Political leaders in countries like Australia and South Korea have sought to reassure investors that their banks are well capitalized and not facing the crisis.

While Credit Suisse has had its own issues separate from the issues that have taken down SVB and Signature, analysts said rising interest rates in the US and overseas have put pressure on asset values. held by lenders around the world.

The Swiss bank, which has struggled with low profitability in recent years, warned on Tuesday that a recent flood of customers withdrawing their money had slowed down but “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. It was convicted in connection with a money laundering conspiracy involving a drug ring last summer. And he had substantial entanglements with a collapsed hedge fund and one bankrupt UK lender.

Rob Wile And Reuters contributed.

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