Home » Credit Suisse to borrow up to $54 billion from Swiss National Bank

Credit Suisse to borrow up to $54 billion from Swiss National Bank

Credit Suisse on Thursday said it was taking “decisive action” to strengthen its liquidity by exercising its option to borrow from the Swiss National Bank up to 50 billion Swiss francs ($54 billion).

The move came after Swiss regulators pledged a liquidity lifeline to Credit Suisse in an unprecedented move by a central bank after the flagship Swiss lender’s shares fell by as much as 30% on Wednesday.

Credit Suisse said the borrowing will be made under the covered loan facility and a short-term liquidity facility, fully collateralized by high quality assets.

It also announced offers for senior debt securities for cash of up to 3 billion francs. “This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” it said.

In a joint statement, the Swiss financial regulator FINMA and the nation’s central bank sought to ease investor fears around Credit Suisse on Wednesday, saying it “meets the capital and liquidity requirements imposed on systemically important banks.” They said the bank could access liquidity from the central bank if needed.

The statement came after a major government and at least one bank put pressure on Switzerland to act, said people familiar with the matter, as the lender became caught up in a crisis of confidence after the collapse of Silicon Valley Bank last week. Credit Suisse said it welcomed the statement of support from the Swiss National Bank and FINMA.

Credit Suisse would be the first major global bank to be given such a lifeline since the 2008 financial crisis – though central banks have extended liquidity more generally to banks during times of market stress including the coronavirus pandemic.SVB’s demise, followed by that of Signature Bank two days later, sent global bank stocks on a roller-coaster ride this week, with investors discounting assurances from U.S. President Joe Biden and emergency steps giving banks access to more funding.

By Wednesday, focus had shifted from the United States to Europe, where Credit Suisse led a rout in bank shares after its largest investor said it could not provide more financial assistance because of regulatory constraints.

Hoping to quell concerns, FINMA and the Swiss central bank said there were no indications of a direct risk of contagion for Swiss institutions from U.S. banking market turmoil. Earlier, Credit Suisse shares led a 7 per cent fall in the European banking index, while five-year credit default swaps (CDS) for the flagship Swiss bank hit a new record high.