50 billion francs from the National Bank: Credit Suisse reaches for the lifeline

The Swiss bank Credit Suisse, which has come under pressure, has borrowed CHF 50 billion from the country’s national bank. In order to calm the markets, the Swiss monetary authorities had previously promised help “if necessary”.

Struggling with a deep crisis of confidence, Credit Suisse is taking “decisive action” to strengthen its liquidity. The company announced that it was redeeming its option to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank (SNS).

The borrowing is fully secured by first class assets. In addition, the bank is making offers for up to three billion Swiss francs of senior debt for cash.

“With these actions, we are strengthening Credit Suisse as part of our strategic transformation to create value for our clients and other stakeholders. We thank the SNB and Finma for executing our strategic transformation. My team and I are committed to moving forward quickly, to create a simpler bank that is more focused on customer needs,” said bank boss Ulrich Körner.

Falling prices trigger concerns around the world

The move came after Swiss regulators pledged liquidity support to Credit Suisse after shares of the Swiss flagship fell as much as 30 percent on Wednesday. Credit Suisse is the first global, systemically important bank since the financial crisis to receive a tailor-made lifeline. The dramatic fall in the price of Credit Suisse had triggered concerns around the world and plunged the financial markets into turbulence.

The Swiss National Bank and the financial market supervisory authority Finma announced in a joint statement in the evening that Credit Suisse meets the capital and liquidity requirements for systemically important banks. In addition, there is currently no evidence of a direct risk of contagion for Swiss institutions due to the problems of the US banks.

Credit Suisse boss appeases customers

Credit Suisse had also tried to reassure bank customers. It is a “very well capitalized bank,” emphasized the head of Credit Suisse Switzerland, André Helfenstein, in an interview with the Swiss broadcaster Blick TV.

Of course, one is not satisfied with the share price, said Helfenstein. However, this has nothing to do with the security of customer deposits. The price slump is due to the fact that the bank stocks are under pressure because of the problems of US regional banks.

Major shareholder does not want to inject any further money

The collapse of several regional US banks recently triggered uncertainty in the banking sector. This had a particularly strong impact on Credit Suisse, which was already suffering. The bank’s shares fell in Zurich by more than 30 percent at times to a record low of 1.56 francs (1.59 euros) and closed at the end of trading with a decline of more than 24 percent.

Investors also took to their heels because the major Saudi shareholder Saudi National Bank announced on Wednesday that it would not be able to provide the major Swiss bank with any further money. Credit Suisse reported a loss of 7.3 billion Swiss francs and massive withdrawals of client assets of 123 billion last year.

Also price losses at other banks

The dramatic fall in the share price of Switzerland’s second-largest bank had triggered concerns worldwide on Wednesday and also dragged down the papers of other European banks. The industry index Stoxx Europe 600 Banks fell by 6.9 percent. In Germany, Commerzbank shares slipped by 8.7 percent.

Regulators, governments and other financial institutions around the world tried to assess the risks. Individual governments called on Switzerland behind the scenes to intervene. In the evening, the authorities then came on the scene. “FINMA and the SNB are following developments very closely and are in close contact with the Federal Department of Finance to ensure financial stability,” the statement said.