Credit Suisse (NYSE: CS) has announced that it will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss central bank to shore up its finances. As part of its efforts to become a simpler bank, the lender said it was taking quick action to bolster its liquidity.
The company’s shares plunged 24% on Wednesday after the company revealed “weakness” in its financial reporting. This sparked a global sell-off on European markets, as well as fears of a larger financial disaster.
Credit Suisse claimed its borrowing measures reflected “decisive action to strengthen [the bank]”.
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“My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs,” Credit Suisse’s chief executive Ulrich Koerner said in a statement.
The development comes after Swiss National Bank already signaled that it is ready to provide the bank with liquidity “if necessary.”
The Swiss central bank, and the Swiss Financial Market Supervisory Authority, attempted to assuage investor concerns by stating that they were ready to assist Credit Suisse if necessary. Tight standards apply to Swiss financial institutions to “ensure their stability,” and Credit Suisse meets the requirements for systemically important banks, according to regulators.
“There are no indications of a direct risk of contagion for Swiss institutions due to the current turmoil in the US banking market,” they said in a joint statement.
Observers, however, have pointed out that the liquidity the central bank plans to infuse in Credit Suisse seems to be over commensurate for a company with a market capitalization of $8.3 billion.
Following the drop in Credit Suisse shares on Wednesday, a significant investor, the Saudi National Bank, stated that it would not pump additional cash into the Swiss firm. Worries swept throughout financial markets, with all major indices tumbling precipitously.
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According to a representative for the US Treasury Department, the Credit Suisse situation is also being closely monitored by the federal department as they are reportedly in contact with global counterparts.
The deepening crisis at Credit Suisse Group AG has added to global investors’ anxieties about financial stability, who are still on edge following the swift collapse of three regional US banks.
The Zurich-based company, which is undergoing a complex three-year restructuring, has been trying to keep deposit outflows under control. Credit derivatives connected to Credit Suisse are reaching levels reminiscent of the 2008 financial crisis.
Information for this briefing was found via Bloomberg, BBC, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
