Credit Suisse to borrow up to CHF50 billion from Swiss National Bank

Credit Suisse shares plummeted following bank failures in the United States. Keystone / Justin Lane

Switzerland’s second largest bank said it plans to borrow up to CHF50 billion ($54 billion) from the Swiss central bank to shore up its liquidity and boost investor confidence after the bank’s shares plummeted in a day of market turmoil on Wednesday.

“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,” wrote the bank in a statementExternal link on Wednesday evening.

The bank will also access a “short-term liquidity facility” and will buy back about CHF3 billion in debt.

The markets responded positively. Credit Suisse shares surged by as much as 32% in opening trade on Thursday after news of the lifeline. They retreated during the day and ended up 19%, reversing some of the losses on Wednesday that stripped a quarter off the bank’s market value.

The Credit Suisse announcement came a few hours after the Swiss National Bank (SNB) said that it was prepared to provide the bank with emergency liquidity.

The joint statementExternal link from the SNB and the Swiss Financial Market Supervisory Authority (FINMA) on Wednesday evening was an attempt to calm markets. Credit Suisse shares fell nearly 25% at the close of trading at CHF1.69 per share – an historic low for Switzerland’s second largest bank.

+ Where did it all go wrong at Credit Suisse?

Other banking woes

Other bank shares also suffered with three banks in the United States collapsing in recent weeks.

“The problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets,” read the SNB/FINMA joint statement. “If necessary, the SNB will provide CS [Credit Suisse] with liquidity.”

The move sends out a signal that the Swiss financial authorities will go to extraordinary lengths to avert the collapse of a bank deemed ‘too big to fail’.

It is also probably designed to convince depositors to keep their money at Credit Suisse, thus avoiding a bank run.

The SNB’s promise of emergency liquidity came after Credit Suisse’s largest shareholder, the Saudi National Bank, said it would not stump up any more money after injecting billions into the bank last year.

+ The petrodollars fuelling Credit Suisse’s restructuring

Another major shareholder, Harris Associates, had earlier said it would sell its stake in Credit Suisse.

FINMA added that “Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks”.

This means the regulator is satisfied that Credit Suisse has enough capital to absorb market volatility.

This is not the first time that the Swiss central bank has rushed to the aid of an ailing commercial bank.

In 2008, the SNB took toxic mortgage loan-related assets from UBS to keep the bank afloat during the financial crisis.

Credit Suisse has endured a disastrous few years, culminating in a CHF7.3 billion loss in 2022. That same year, the bank said it would shed 9,000 jobs in an attempt to revive its fortunes.

This story was updated on March 16, 2023 to include statement by Credit Suisse.