Image copyright Reuters
Credit Suisse intends to borrow the equivalent of about $54 billion from Switzerland’s central bank.
The troubled bank said it had decided to take “decisive steps” to boost its liquidity.
Swiss regulators said they were ready to support the bank “if necessary” in light of fears of a wider crisis as a result of the collapse of US bank Silicon Valley.
Credit Suisse shares fell a record 24 percent.
The bank’s troubled situation is raising concerns among investors, adding to their fears that began with the bankruptcy of Bank of America.
Concerns reached stock markets, which saw sharp declines in all major indices.
Silent fears
The Swiss central bank, along with the financial market watchdog, sought to allay concerns.
The two parties issued a joint statement: “There are no signs of a risk that the US banking market turmoil will spill over directly to Swiss companies.”
The report noted that stricter rules apply to Swiss financial institutions “to ensure their stability” and that Credit Suisse “meets the requirements of banks deemed to be systemically important”.
He added that the central bank would provide liquidity to Credit Suisse “if needed.”
The fears put pressure on stocks around the world, and the Stoxx Europe bank share index posted a 7 percent decline.
Britain’s FTSE 100 index fell 3.8 percent, its biggest one-day decline since the early days of the coronavirus pandemic in 2020.
The German DAX index posted a decline of more than 3 percent, and the French CAC index closed down about 3.5 percent. The Spanish IBEX index fell more than 4 percent.
Shares of small and large banks in the United States were hit, contributing to the Dow falling 0.9 percent, while the “Standards and Poor’s 500” index fell 7 percent.
A new global crisis
“Credit Suisse’s troubles have renewed questions about whether this is the start of a new global crisis or just another special event,” wrote Andrew Cunningham of research firm Capital Economics.
The turmoil in the US banking sector began last week with the collapse of Silicon Valley Bank, the 16th largest US bank.
The bank, which specialized in lending to technology companies, was closed on Friday by order of the US regulator in what was described as the biggest bankruptcy of a US bank since 2008.
After the bankruptcy of Silicon Valley Bank, Signature Bank in New York is also closing its doors. The US regulator has guaranteed all deposits in both banks.
However, bankruptcy fears of other banks persisted, leading to trading volatility in bank stocks during the week.
“It is still too early to know the extent of the damage,” the CEO of investment firm BlackRock wrote in an annual letter to investors.
The Swiss “Credit Suisse” bank, founded in 1856, has faced a series of scandals in recent years, including money laundering and other problems.
The bank lost money in 2021 and 2022, which saw its worst banking crisis since 2008, and warned it would not be profitable before 2024.
Credit Suisse shares took a hit earlier this week as clients withdrew funds, including 110 billion Swiss francs ($120 billion) in the last three months of 2022, after their value fell by two-thirds last year.
Image copyright Reuters
Credit Suisse shares hit record lows
Credit Suisse insisted its financial position was not a concern, and its chief executive said cash balances were “very strong”.
However, the bank’s shares closed down 24 percent as other banks rushed to cut their dealings with it.
Bloomberg cited BNP Paribas as saying it had stopped accepting certain deals if Credit Suisse was a party to them.
“This banking crisis came from America and now the world is watching how it will cause problems in Europe,” said Robert Halver, director of capital markets at the German “Bader” bank.
The decline in stocks indicates that many banks may be exposed to large losses.
“Award-winning beer geek. Extreme coffeeaholic. Introvert. Avid travel specialist. Hipster-friendly communicator.”
