Credit Suisse has said it will borrow up to 50bn Swiss francs (£44.5bn) from the Swiss central bank to shore up its liquidity.
The bank said it was “taking decisive action to pre-emptively strengthen its liquidity”, after a drop in its shares intensified fears of a global financial crisis.
“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 said in a statement.
Credit Suisse, Switzerland’s second largest lender, is the first major global bank to be given such a lifeline since the 2008 financial crash – though central banks extended liquidity more generally to banks during times of market stress such as during the coronavirus pandemic.
It came after the Swiss National Bank and the Swiss financial markets regulator pledged emergency funding would be available if it was needed.
The central bank issued an assurance that Credit Suisse met “the capital and liquidity requirements imposed on systemically important banks”.
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FTSE 100 takes £75bn hit as Europe becomes new focus of Silicon Valley Bank fallout
Shares fall by up to 30%
Credit Suisse rattled markets on Wednesday by announcing it had found “material weaknesses” in its financial reporting processes for 2021 and 2022.
Its market value fell by up to 30% after the biggest shareholder, Saudi National Bank, said it would not provide any further financial assistance because rules prevent it from raising its equity stake above 10%, close to where it currently sits.
It prompted an automatic pause in trading of Credit Suisse shares on the Swiss market and tanked shares of other European banks – some by double digits.
Concerns about banking sector
The FTSE lost £75bn in combined market value by the close on Wednesday after suffering its deepest fall on a points basis since the early days of the COVID crisis.
Speaking at a financial conference in the Saudi capital of Riyadh on Wednesday, Credit Suisse chairman Axel Lehmann defended the bank, saying “we already took the medicine” to reduce risks.
When asked if he would rule out government assistance in the future, he replied: “That’s not a topic… We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that’s not a topic whatsoever.”
Credit Suisse has faced several crises in recent years, from a corporate spying scandal, losses related to the collapse of a supply chain finance group Greensill Capital and the collapse of hedge fund management company Archegos Capital.
In an annual report on Tuesday the bank said customer deposits fell 41% (159.6bn Swiss francs or £142bn) at the end of last year compared to the year before.
The turmoil has added to concerns about the broader banking sector after Silicon Valley Bank and Signature Bank, two US mid-size firms, collapsed last week.