{"id":30156,"date":"2023-03-16T08:40:41","date_gmt":"2023-03-16T08:40:41","guid":{"rendered":"https:\/\/www.nsemgh.com\/?p=30156"},"modified":"2023-03-16T08:40:43","modified_gmt":"2023-03-16T08:40:43","slug":"credit-suisse-to-borrow-54-billion-from-swiss-central-bank","status":"publish","type":"post","link":"https:\/\/www.nsemgh.com\/2023\/03\/16\/credit-suisse-to-borrow-54-billion-from-swiss-central-bank\/","title":{"rendered":"Credit Suisse to borrow $54 billion from Swiss Central Bank"},"content":{"rendered":"\n

Swiss bank Credit Suisse said Thursday it will move to shore up its finances, borrowing up to $54 billion from the central bank after its shares plunged, dragging down other major European lenders in the wake of bank failures in the United States.<\/strong><\/p>\n\n\n\n

Credit Suisse said would exercise an option to borrow up to 50 billion francs ($53.7 billion) from the central bank.<\/p>\n\n\n\n

\u201cThis additional liquidity would support Credit Suisse\u2019s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,\u201d the bank said.<\/p>\n\n\n\n

Fanning new fears about the health of financial institutions<\/strong> following the recent collapse of Silicon Valley Bank and Signature Bank in the U.S., at one point, Credit Suisse shares lost more than a quarter of their value on Wednesday. <\/p>\n\n\n\n

The share price hit a record low after the bank\u2019s biggest shareholder \u2014 the Saudi National Bank \u2014 told news outlets that it would not put more money into the Swiss lender, which was beset by problems long before the U.S. banks collapsed<\/strong>. The Saudi bank is seeking to avoid regulations that kick in with a stake above 10%, having invested some 1.5 billion Swiss francs to acquire a holding just under that threshold.<\/p>\n\n\n\n

The turmoil prompted an automatic pause in trading of Credit Suisse shares on the Swiss market and sent shares of other European banks tumbling, some by double digits. <\/p>\n\n\n\n

Speaking Wednesday at a financial conference in the Saudi capital of Riyadh, Credit Suisse Chairman Axel Lehmann defended the bank, saying, \u201cWe already took the medicine\u201d to reduce risks.<\/p>\n\n\n\n

When asked if he would rule out government assistance in the future, he said: \u201cThat\u2019s not a topic. … We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that\u2019s not a topic whatsoever.\u201d<\/p>\n\n\n\n

Switzerland\u2019s central bank announced late Wednesday that it was prepared to act, saying it would support Credit Suisse if needed. A statement from the bank did not specify whether the support would come in the form of cash or loans or other assistance. The regulators said they believed the bank had enough money to meet its obligations.<\/p>\n\n\n\n

A day earlier, Credit Suisse reported that managers had identified \u201cmaterial weaknesses\u201d in the bank\u2019s internal controls on financial reporting as of the end of last year. That fanned new doubts about the bank\u2019s ability to weather the storm.<\/p>\n\n\n\n

Credit Suisse stock dropped<\/strong> about 30%, to about 1.6 Swiss francs ($1.73), before clawing back to a 24% loss at 1.70 francs ($1.83) at the close of trading on the SIX stock exchange. At its lowest, the price was down more than 85% from February 2021.<\/p>\n\n\n\n

After the joint announcement from the Swiss National Bank and the Swiss financial markets regulator, the shares also made up some ground on Wall Street.<\/p>\n\n\n\n

The stock has suffered a long, sustained decline: In 2007, the bank\u2019s shares traded at more than 80 francs ($86.71) each.<\/p>\n\n\n\n

With concerns about the possibility of more hidden trouble in the banking system<\/strong>, investors were quick to sell bank stocks.<\/p>\n\n\n\n

France\u2019s Societe Generale SA dropped 12% at one point. France\u2019s BNP Paribas fell more than 10%. Germany\u2019s Deutsche Bank tumbled 8%, and Britain\u2019s Barclays Bank was down nearly 8%. Trading in the two French banks was briefly suspended.<\/p>\n\n\n\n

The STOXX Banks index of 21 leading European lenders sagged 8.4% following relative calm in the markets Tuesday.<\/p>\n\n\n\n

Shares in U.S. markets were mixed on Wednesday, with the Nasdaq composite edging 0.1% higher while the S&P 500 dropped 0.7%. The Dow Jones Industrial Average ended 0.9% lower after logging bigger losses early in the session. <\/p>\n\n\n\n

Japanese banks resumed their downtrend, with Resona Holdings, the nation\u2019s No. 5 bank, falling 5% while other major banks fell more than 3%. <\/p>\n\n\n\n

The turbulence came a day ahead of a meeting by the European Central Bank<\/strong>. President Christine Lagarde said last week, before the U.S. failures, that the bank would \u201cvery likely\u201d increase interest rates by a half percentage point to fight against inflation. Markets were watching closely to see if the bank carries through despite the latest turmoil.<\/p>\n\n\n\n

Credit Suisse is \u201ca much bigger concern for the global economy\u201d than the midsize U.S. banks that collapsed, said Andrew Kenningham, chief Europe economist for Capital Economics. <\/p>\n\n\n\n

It has multiple subsidiaries outside Switzerland and handles trading for hedge funds.<\/p>\n\n\n\n

\u201cCredit Suisse is not just a Swiss problem but a global one,\u201d he said.<\/p>\n\n\n\n

He noted, however, that the bank\u2019s \u201cproblems were well known so do not come as a complete shock to either investors or policymakers.\u201d<\/p>\n\n\n\n

The troubles \u201conce more raise the question about whether this is the beginning of a global crisis or just another \u2018idiosyncratic\u2019 case,\u201d Kenningham said in a note. \u201dCredit Suisse was widely seen as the weakest link among Europe\u2019s large banks, but it is not the only bank which has struggled with weak profitability in recent years.\u201d<\/p>\n\n\n\n

Leaving a Credit Suisse branch in Geneva, Fady Rachid said he and his wife are worried about the bank\u2019s health. He planned to transfer some money to UBS.<\/p>\n\n\n\n

\u201cI find it hard to believe that Credit Suisse is going to be able to get rid of these problems and get through it,\u201d said Rachid, a 56-year-old doctor.<\/p>\n\n\n\n

Investors responded to \u201ca broader structural problem\u201d in banking following a long period of low interest rates and \u201cvery, very loose monetary policy,\u201d said Sascha Steffen, professor of finance at the Frankfurt School of Finance & Management.<\/p>\n\n\n\n

In order to earn some yield, banks \u201cneeded to take more risks, and some banks did this more prudently than others.\u201d<\/p>\n\n\n\n

European finance ministers said this week that their banking system has no direct exposure to the U.S. bank failures.<\/p>\n\n\n\n

Europe strengthened its banking safeguards after the global financial crisis that followed the collapse of U.S. investment bank Lehman Brothers in 2008 by transferring supervision of the biggest banks to the central bank, analysts said. <\/p>\n\n\n\n

The Credit Suisse parent bank is not part of EU supervision, but it has entities in several European countries that are. Credit Suisse is subject to international rules requiring it to maintain financial buffers against losses as one of 30 so-called globally systemically important banks, or G-SIBs.<\/p>\n\n\n\n

The Swiss bank has been pushing to raise money from investors and roll out a new strategy to overcome an array of troubles, including bad bets on hedge funds<\/strong>, repeated shake-ups of its top management<\/strong> and a spying scandal<\/strong> involving Zurich rival UBS.<\/p>\n\n\n\n

In an annual report released Tuesday, Credit Suisse said customer deposits fell 41%, or by 159.6 billion francs ($172.1 billion), at the end of last year compared with a year earlier.<\/p>\n","protected":false},"excerpt":{"rendered":"

Swiss bank Credit Suisse said Thursday it will move to shore up its finances, borrowing up to $54 billion from the central bank after its shares plunged, dragging down other major European lenders in the wake of bank failures in the United States. Credit Suisse said would exercise an option to borrow up to 50 billion […]<\/p>\n","protected":false},"author":8,"featured_media":30157,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_post_source_name":"","_post_source_url":"","footnotes":""},"categories":[61],"tags":[7358,9330,8176,9042,5307,11583,7960,7331,3977,7489,9233,9743,3580,8440,9375,5875,10537,9478,5196,159,6621,9505,12310,9127,12354,10627,5575,6351,3577,66,2264,12634,12773,6546,10954,9343,9326,5139,6565,5721,10634,10742,10303,9833,6864,5612,8968,11973,3805,12103,10313,10214,6664,9058,13211,8160,12264,6736,6808,9714,9695,9710,11279,6327,7972,11325,8840,9711,9713,5348,13307,9744,9262,10829,9085,3954],"class_list":["post-30156","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-bank","tag-banks","tag-barclays","tag-borrowing","tag-britain","tag-capital","tag-case","tag-cash","tag-central-bank","tag-chairman","tag-collapse","tag-credit-suisse","tag-credit-suisse-csgn-s","tag-crisis","tag-decline","tag-deutsche-bank","tag-doctor","tag-dropped","tag-economy","tag-eu","tag-europe","tag-european","tag-exercise","tag-february","tag-finance","tag-financial-crisis","tag-france","tag-french","tag-future","tag-germany","tag-government","tag-health","tag-increase","tag-inflation","tag-international","tag-investment","tag-japanese","tag-jones","tag-loans","tag-losses","tag-lost","tag-market","tag-medicine","tag-meeting","tag-ministers","tag-money","tag-nasdaq","tag-one","tag-president","tag-price","tag-professor","tag-rates","tag-regulator","tag-sp","tag-sa","tag-saudi","tag-scandal","tag-school","tag-shares","tag-silicon-silicon-vally-bank","tag-silicon-valley","tag-silicon-valley-bank","tag-spying","tag-stock","tag-storm","tag-street","tag-strong","tag-svb","tag-swiss","tag-switzerland","tag-trading","tag-ubs","tag-united-states","tag-wall-street","tag-weather","tag-will"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts\/30156","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/comments?post=30156"}],"version-history":[{"count":0,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/posts\/30156\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/media\/30157"}],"wp:attachment":[{"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/media?parent=30156"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/categories?post=30156"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nsemgh.com\/api-json\/wp\/v2\/tags?post=30156"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}