Switzerland-based global investment bank and finance company Credit Suisse AG said on Thursday it would borrow 50 billion Swiss francs (50.7 billion euros, $54 billion) from the country’s central bank in to strengthen its liquidity and deposit reserves.
He also made a buyout offer on $2.5 billion in US debt and €500 million in European debt.
“These steps demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” said Ulrich Körner, Chief Executive Officer of the investment firm.
The measures come amid a sharp drop in Credit Suisse’s share price which triggered greater fears of a broader crisis in bank deposits.
The decision to borrow from the Swiss National Bank (SNB) makes Credit Suisse the first major global bank to benefit from such a lifeline since the 2008 global financial crisis. Swiss authorities said on Wednesday that Credit Suisse complied with “the capital and liquidity requirements imposed on systemically important banks” and that it could access central bank liquidity if needed.
Central banks around the world have extended liquidity to banks generally during times of market turbulence, including those induced by the COVID pandemic.
What triggered the sale?
Credit Suisse shares fell 30% on Wednesday, triggered by a Bloomberg TV interview where Saudi National Bank’s Mr. al-Khudairy – Credit Suisse’s largest shareholder – said he would “absolutely not inject “more cash in the bank. He later clarified that his firm stance was to abide by regulatory rules and statutory limitations.
The market, already on edge since the collapse last week of two mid-sized American companies Bank of Silicon Valley and Signature Bank, continued to sell shares of Credit Suisse despite assurances that the bank had a strong cash base with a cash deposit ratio of 150%. 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 prudential sources told Reuters news agency that the European Central Bank had contacted banks under its supervision to ask them about their exposures to Credit Suisse. The US Treasury also said it was monitoring the situation around Credit Suisse and was in touch with its global counterparts, according to a Treasury spokesperson.
mk/sms (Reuters, AFP)