Topline
Credit Suisse on Thursday said it is exercising an option to borrow $53.75 billion (CHF 50 billion) from the Swiss National Bank, as it looks to stave off concerns about its liquidity a day after the crisis-ridden bankâs stock plunged to a record low.
Key Facts
In a press release, Credit Suisse said it was taking this action to âpre-emptively strengthen its liquidityâ and the funds were being borrowed from the Swiss central bank under its covered loan facility and a short-term liquidity facility.
The borrowing comes a day after the Swiss National Bank said it was ready to provide Credit Suisse with liquidity âif necessary,â while adding that the bank met all âcapital and liquidity requirements imposed on systemically important banks.â
In an effort to lower interest expense, Credit Suisse also announced it will open an offer to buy back debt securities worth around $3 billionâincluding 10 U.S. dollar bonds worth $2.5 billion and four Euro bonds worth $530 million (âŹ500 million).
The bankâs CEO Ulrich Koerner said the bank was taking âdecisive actionâ as it continues with its strategic transformation plan to âdeliver a simpler and more focused bank built around client needs.â
Key Background
The Zurich-based lender, which has been battling a multitude of crises, saw its stock tumble to a record low on Wednesday, ending the day more than 24% in the red. Global banking stocks have taken a major hit over the past few days amid concerns that the collapse of Silicon Valley Bank could spiral into a larger crisis. Most of Credit Suisse problems, however, predate the collapse of SVB, including liquidity fears triggered by a surge in customer withdrawals last year, which the bank says has now âstabilized to much lower levelsâ but has ânot yet reversed.â As concerns about Credit Suisseâs financial health began to mount, its top shareholder, Saudi National Bank, ruled out injecting more funds into the bank, especially due to âregulatory and statutoryâ reasons.
News Peg
Credit Suisse has been beset by a litany of scandals over the past few years. Earlier this week, the bank disclosed it had found âmaterial weaknessesâ in its financial reporting processes that could have resulted in âmisstatementsâ of financial results. The lender said its management was working on a plan to remedy the issue, while adding that its annual report âfairly presentsâ its consolidated financial condition for the last two years. In 2021, the bank reported a $1.72 billion loss due to the bankruptcy of fund partner Greensill Capital, and took another $5.5 billion hit from the collapse of hedge fund Archegos Capital. Last March, the lender’s handling of information about assets linked to Russian oligarchs came under the scrutiny of the U.S. House oversight committee. In October last year, the bank saw a surge in withdrawals from customers after social media rumors sparked concerns about Credit Suisseâs financial health. In its earnings report last month, the company reported losses of $8 billion (CHF 7.3 billion) for 2022âits biggest annual loss since the 2008 financial crisis.
Tangent
Several top European banks saw the share values plummet on Thursday, as fears about the financial health of banking institutions jumped across the Atlantic. In Paris, BNP Paribasâ shares fell by more than 10%, while SociĂ©tĂ© GĂ©nĂ©rale ended the day down by more than 12%. Shares of the Frankfurt listed Deutsche Bank fell by 9.25%, while Santanderâs stock slumped by nearly 7% in Madrid.
Further Reading
Credit Suisse Stock Plunges To Record Low As Bank Concerns Grow (Forbes)
Another Credit Suisse Crisis: Bank Finds ‘Material Weaknesses’ In Its Financial Reporting (Forbes)