Credit Suisse has announced that it will take a CHF50bn ($53.7bn) loan from the Swiss central bank, in an action it says will “pre-emptively strengthen its liquidity” as it moves to stem a crisis of confidence a day after its share price plummeted.
This additional liquidity would support the bank in taking the “necessary steps to create a simpler and more focused bank built around client needs”, its statement said. The bank said it was also making buyback offers on about $3bn worth of debt.
The bank said its borrowing measures “demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders”.
Asian stocks slid on Thursday and investors turned to the safety of gold, bonds and dollars as fears of a broader crisis intensified despite the intervention, leaving markets on edge ahead of a European Central Bank meeting (ECB) later on Thursday.
Expectations of a 50 basis-point rate rise in Europe have evaporated as markets radically rethink the global interest rate outlook. Money market pricing implies a less than a 20% chance of such a rise from the ECB, down from 90% a day earlier.
The move to shore up Credit Suisse’s finances came a few hours after the central bank and the Swiss financial markets regulator issued a joint statement pledging emergency funding if needed. They insisted there was no “direct risk” of contagion from turmoil in the US banking system after the sudden collapse last week of the US lender Silicon Valley Bank.
“Credit Suisse meets the capital and liquidity requirements imposed on systemically important banks,” the Swiss National Bank said. Credit Suisse is one of 30 banks globally deemed too big to fail, forcing it to set aside more cash to weather a crisis.
Credit Suisse saw its shares fall by as much as 30% on Wednesday, prompted by comments from Credit Suisse’s largest shareholder, Saudi National Bank (SNB), which said it was unable to stump up more cash because of regulatory restrictions limiting its holding to below 10%.
The suggestion of a limit to support for Credit Suisse, which reported a loss of CHF7.3bn (£6.6bn) for 2022, sent its share price tumbling, ending the day down by 24.5%.
The bank, Europe’s 17th largest lender, has been struggling to keep customers after a string of scandals in recent years. Credit Suisse strengthened its balance sheet with a CHF4bn (£3.6bn) fundraising in November designed to finance a restructuring plan.
In a statement on Wednesday, the chairman, Axel Lehmann, tried to reassure customers and investors, saying: “We have strong capital ratios, a strong balance sheet. We already took the medicine.”
Shares in other big European banks fell on Wednesday, with investors concerned by potential unrealised losses lurking in their portfolios. More than £75bn was wiped off London’s blue chip index, marking the FTSE 100’s sharpest one-day drop since Russia invaded Ukraine, ending the day down 3.83%.
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The Bank of England said the UK banking system was not at risk, referring to its statement released earlier this week, which said: “The wider UK banking system remains safe, sound, and well capitalised.”
Credit Suisse’s problems – which have led to a leadership overhaul and sparked a wide-ranging turnaround plan in recent months – are relatively unique and should not come as a surprise to investors, according to some analysts.
The lender has been trying to draw a line under multiple scandals over the past decade involving corporate espionage, alleged misconduct, sanctions busting, money laundering and tax evasion. The bank has suffered an exodus of clients, who have continued to pull their cash, contributing to ballooning losses that grew to 7.3bn Swiss francs in 2022.
Silicon Valley Bank collapsed shortly after revealing it had a hole in its finances, caused by a drop in the value of bonds that it tried to sell to make up for a drop in its tech customers’ deposits. Those bonds had dropped in value due to recent interest rate hikes. The shortfall spooked investors, led to a share sell-off and a run on its deposits, before authorities stepped in last week.
Agence France-Presse and Reuters contributed to this report