Credit Suisse shares rebound after Swiss central bank’s $1 million bailout

Credit Suisse shares rebound after Swiss central bank’s $1 million bailout

The troubled bank fell to its lowest price ever this week on fears of possible bankruptcy (Reuters)

Shares of Credit Suisse jumped sharply at the start of trading on the Swiss Stock Exchange in Zurich, Switzerland’s main market. The troubled bank’s paper rose 40% before stabilizing. The increases come after days of speculation that drove the stock to record highs last Wednesday and after the entity announced that the Swiss National Bank would extend a lifeline of up to $54 trillion to allay concerns savers and investors.

Credit Suisse, in the eye of the storm of the European banking crisis, clawed back 19.50% after announcing it would seek a loan of up to $54 billion from the Swiss central bank to bolster liquidity and investor confidence.

Shares of the Zurich-based entity had fallen 24% on Wednesday to a record low. The bank had become the center of investor fears after the resounding collapses of Silicon Valley Bank and Signature Bank in the United States and pushed major global markets lower.

Credit Suisse said on Thursday it was taking ‘decisive steps’ to bolster its liquidity by borrowing up to $54 billion from the Swiss central bank, after falling stocks heightened fears of a wider crisis bank deposits.

The Swiss bank’s woes have shifted the attention of investors and regulators from the United States to Europe, where Credit Suisse led a sell-off in bank stocks after its biggest investor said it would not. could not provide more financial assistance due to regulatory restrictions.

The Swiss bank’s announcement earlier this morning in Europe helped pare some of those losses, although trading was volatile.

In its statement Thursday morning, Credit Suisse said it was exercising its option to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.

Investors’ attention is now shifting to actions taken by Asian central banks and other regulators to restore confidence in the banking system, as well as regional corporate exposure to Credit Suisse.

In a joint statement on Wednesday, Swiss financial regulator FINMA and the country’s central bank sought to allay investor fears over Credit Suisse, saying it “meets the capital and liquidity requirements imposed on systemically important banks.” “. As noted, the entity could access central bank liquidity if needed. Credit Suisse welcomed the statement of support from the Swiss National Bank and FINMA.

Credit Suisse would be the first major global bank to be granted such a lifeline since the 2008 financial crisis, although central banks have more generally provided liquidity to banks during times of market stress, including the pandemic. of the coronavirus.

The bankruptcy of SVB last week, followed by that of Signature Bank two days later, set off a rollercoaster ride for global bank stocks and bonds this week as investors ignored guarantees offered by US President Joe Biden and emergency measures that gave banks access to more funding.

FINMA and the Swiss central bank said there was no indication of risk of direct contagion to Swiss institutions from the turmoil in the US banking market.

Earlier, shares of Credit Suisse dragged the European banking index .SX7P down 7%, as the flagship Swiss financial institution’s five-year credit default swaps (CADS) hit a new all-time high.

Rapid increases in interest rates have made it harder for some businesses to repay or service loans, increasing the risk of loss for lenders also worried about a recession.

Traders are now betting that the Federal Reserve, which was expected to ramp up its rate hike campaign last week amid persistent inflation, will be forced to pause and even backtrack.

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Melissa Galbraith
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