Credit suisse’s $54B liquidity boost
Credit Suisse Borrows $54 Billion from Swiss National Bank
Switzerland’s second-largest bank, Credit Suisse, has secured emergency funding of up to $54 billion from the Swiss National Bank (SNB) to improve its liquidity and restore investor confidence. Credit Suisse’s shares fell by 25% on Wednesday, raising concerns about a global banking crisis. As a result of the announcement, the European banking index briefly rose, but was virtually flat by 1130 GMT. The situation has prompted policymakers to emphasize that banks are better capitalized and funds are more easily available than in the 2008 financial crisis. Credit Suisse is the first major global bank to be given an emergency lifeline since 2008.
Credit Suisse’s Announcement Helps Trim Losses, but Trade Remains Volatile.
After the announcement, Credit Suisse shares briefly bounced back from Wednesday’s 25% decline, but ceded some ground by late morning. Insurance protection on bonds issued by BNP Paribas, Deutsche Bank, and UBS also decreased, and stocks had been in the red as investors rushed to the relative “safe havens” of gold, bonds, and the dollar through most of the Asian day. While Credit Suisse’s announcement helped trim some losses, trade was volatile, and sentiment was fragile.
Credit Suisse’s Plan to Streamline Operations and Buy Time for Restructuring
Credit Suisse Chief Executive Ulrich Koerner has pledged to rapidly move forward with a plan to streamline operations. He told Credit Suisse staff in a memo that they should focus on facts, and the bank would continue to focus on the transformation from a position of strength. Koerner cited an improved liquidity coverage ratio and recent capital increases. Analysts say the measures will buy Credit Suisse time to carry out its planned restructuring. However, there could well be further moves to pare down the Swiss lender.
Credit Suisse’s Troubles Shift Focus for Investors and Regulators from the United States to Europe
Credit Suisse’s problems have shifted the focus for investors and regulators from the United States to Europe, where the bank led a selloff in bank shares after its largest investor said it could not provide more funds because of regulatory constraints. Concerns about Credit Suisse have added to broader banking sector fears sparked by last week’s collapse of Silicon Valley Bank (SVB) and Signature Bank, two U.S. mid-size firms. Investor focus is also on any action by central banks and other regulators elsewhere to restore confidence. Policymakers in Australia and South Korea sought to reassure markets that banks in their jurisdictions were well-capitalized.
Rapidly Rising Interest Rates Make It Harder for Some Businesses to Pay Back or Service Loans
Rapidly rising interest rates have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders already worried about a recession. Traders are now betting that the Federal Reserve, which last week was expected to accelerate its interest rate hikes in the face of persistent inflation, may hit pause or reverse course. There is also heightened uncertainty about how hard the European Central Bank will step on the brakes when it meets on rates later on Thursday.
Credit Suisse’s Emergency Funding Prompts the Swiss Cabinet to Hold an Extraordinary Meeting
Swiss media reported that the Swiss cabinet would hold an extraordinary meeting on Thursday to discuss the situation at Credit Suisse. The government declined to comment. The head of Japan’s banking lobby said there were no signs of the Japanese financial system being affected by a crisis of confidence in Credit Suisse. In Asia, Credit Suisse bankers contacted clients to reassure them after the latest inflow of funds. “We’ve been telling them to read the statements and look at the fact that we are buying
