Credit Suisse will borrow up to $54 billion from the Swiss central bank
Credit Suisse said Thursday it plans to borrow up to 50 billion francs ($54 billion) from the Swiss National Bank and buy back 3 billion francs ($3.2 billion) in bonds. So the bank is trying to replenish liquidity and reassure investors who collapsed its shares by 31% the day before.
On Wednesday evening, Credit Suisse asked for public support from the Central Bank and financial regulator FINMA, after which they said: “Strict capital and liquidity requirements applied to Swiss financial institutions ensure their stability. Credit Suisse meets the requirements for systemically important banks. The SNB will provide liquidity if needed.” According to regulators, the problems of some banks in the US do not pose a direct risk of spreading to Swiss financial markets.
On Wednesday, Credit Suisse’s market capitalization fell by almost a third, at close the shares fell 24.2%. Since the beginning of the year, shares have fallen by 39%, and in the last two years by just a little – by 85%. The bank has been trying to restructure its business for about three years, in particular its financially struggling investment banking division, and has changed several CEOs during this time.
The value of bank credit default swaps (CDS), a market-based insurance against insolvency, tripled on Wednesday from the level reached during the 2008 global financial crisis. At least one bank has tried to protect itself from Credit Suisse’s troubles. France’s BNP Paribas has told customers it will not accept CDS where the counterparty is a Swiss bank, Bloomberg writes, citing informed sources.
The decision to raise CBR funds and buy back bonds “demonstrates decisive action to strengthen Credit Suisse as part of continuing our strategic transformation” of the bank, CEO Ulrich Körner said. “My team and I are ready to move forward quickly to create a simpler, more focused, customer-centric bank,” he added.