Credit Suisse, in turmoil, borrows 50 billion from the central bank

Credit Suisse announced on Thursday March 16 a short-term loan of up to 50 billion Swiss francs (50.6 billion euros) from the country’s central bank, the day after a nightmarish day for the second largest bank in the world. country which collapsed on the stock market.

“These steps are a decisive move to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our customers and other stakeholders,” said the bank’s chief executive, Ulrich Körner, quoted in a statement.

At the same time, the bank announced a series of debt buyback operations for around 3 billion Swiss francs. On Wednesday, the title Credit Suisse fell 24.24% at the close and was worth just under 6.7 billion Swiss francs (6.8 billion euros).

After an astonishing silence, the central bank (SNB) and the policeman of the Swiss financial markets assured the group of their support on Wednesday evening. “Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks. If necessary, the SNB will make liquidity available to Credit Suisse,” said the SNB and Finma in a joint press release issued at the start of the evening.

Worst fall in its history

Earlier in the day, the two most senior executives of Credit Suisse had already tried to reassure on the financial solidity of the banking giant but without succeeding in convincing the investors who inflicted on the action of the bank the worst fall in its history.

Perceived as the weak link in Switzerland, the establishment saw its share price drop by up to 30% to reach a new historic low at 1.55 Swiss francs despite the intervention of its president, Axel Lehmann and his director. General Ulrich Körner to try to straighten the bar.

In an interview with the Channel News Asia television channel, retweeted by the bank, Ulrich Körner multiplied the reassuring words: “We are a solid bank, we are a bank of global dimension under Swiss regulation”.

“We meet and exceed virtually all regulatory requirements,” he added, adding, “our capital, our liquidity base is very, very strong.”

Abyss

The concern goes beyond the borders of the Alpine country and the US Treasury said “monitor the situation and be in contact with its international counterparts”.

Investors remained worried Thursday morning, the Asian stock markets opening sharply lower in the wake of the unscrewing the day before of the European places – Paris losing Wednesday evening 3.58% and London 3.83%, signing their worst session since March 2022.

The vertiginous fall of the title began after statements by the president of the Saudi National Bank, the largest shareholder of Credit Suisse. The Saudis came to the rescue of the bank by entering its capital in November. But the Saudi National Bank has “absolutely no” plans to inject more money, mainly for regulatory reasons, said Ammar al-Khudairy, its chairman.

The Saudi National Bank holds a 9.8% stake. But under Swiss law, the market policeman, Finma, should decide if it crossed the 10% threshold.

Stricter regulations

Credit Suisse has been in turmoil since the bankruptcy of the British financial company Greensill, which marked the start of a series of scandals. Since March 2021, the stock has lost more than 83% of its value.

Unlike SVB, Credit Suisse is one of 30 global banks considered too big to fail, which imposes stricter regulations on it to be able to withstand the shock in the event of difficulty.

Credit Suisse launched a restructuring program in October in an attempt to recover. But some shareholders ended up throwing in the towel.

At the beginning of February, Credit Suisse had announced a net loss of 7.3 billion Swiss francs (nearly 7.4 billion euros) for the 2022 financial year and had warned to still expect a “substantial” pre-tax loss in 2023.

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