Credit Suisse To Borrow Over $50B To Bolster Liquidity

Sahana Kiran
Credit Suisse
Source – Wall Street Journal

The downfall of prominent U.S. banks caused havoc all around the globe. The contagion from the crash of the Silicon Valley Bank reached Switzerland. This further forced the government to intervene and provide aid to Credit Suisse. The troubled bank did not refuse and decided to take all the help from the Swiss National Bank.

According to reports, Credit Suisse will borrow an astounding 50 billion Swiss Francs or $53.7 billion from the Swiss central bank.

In a statement, the bank said that the loan was a “decisive action to pre-emptively” bolster its liquidity. The bank further added,

“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.”

It should be noted that the market value of the bank took a huge hit this week. According to recent news, shares of Credit Suisse closed down by more than 30%.

Credit Suisse also mentioned that it repurchased billions of dollars worth of its own debt in order to keep its liabilities and interest payment costs in check, alongside the loan from the Swiss central bank. A total of €500 million [$529 million] in euro bonds and $2.5 billion in US dollar bonds are included in the sale.

Will this move save Credit Suisse from starting another contagion?

Originating back in 1856, the bank was deemed a “globally systemically important bank.” Others on the list were JP Morgan Chase, Bank of America, the Bank of China, and 30 more financial institutions. Further elaborating on how the failure of the bank was a global issue, Andrew Kenningham, chief Europe economist at Capital Economics, said,

“[Credit Suisse] is much more globally interconnected, with multiple subsidiaries outside Switzerland including in the US. Credit Suisse is not just a Swiss problem but a global one.”

While it managed to acquire a loan from the central bank, its shareholders did not want to expand their stake. After a capital increase last autumn, the Saudi National Bank, the largest stakeholder in Credit Suisse, said earlier on March 15, that it would not expand its holdings in the company.