Swiss bank Credit Suisse has said it will borrow up to 54 billion dollars from the Swiss central bank to boost investor confidence after a fall in share prices that raised fears of an international banking crisis, writes Reuters.
The bank’s statement slowed down the impressive selling volumes in the Asian market on the morning of Thursday, the 16th of March, which followed stormy overnight selling sessions in Europe and the US.
In a statement released early on the morning of the 16th of March, Credit Suisse indicated that it will use the opportunity to borrow up to 54 billion dollars from the central bank. On the 15th of March, the Swiss authorities informed that Credit Suisse meets the capital and liquidity requirements set for systemically important banks and may use the support of the Central Bank if necessary.
Credit Suisse is the first major international bank to use such an emergency measure since the 2008 financial crisis, raising questions about whether banks can continue to fight inflation by aggressively raising interest rates.
Asian stocks followed the jitters on Wall Street on Thursday morning, with investors buying gold, bonds, and dollars. Although the bank’s announcement has allowed losses to be reduced, the market is volatile and the sentiment is fragile.
On the 15th of March, Credit Suisse director Ulrich Koerner tried to reassure investors: «Our capital, our liquidity basis is very, very strong. We fulfill and overshoot basically all regulatory requirements.»
The bank’s problems have drawn the attention of investors and regulators from the US to Europe. Credit Suisse began selling shares in the bank after its biggest investor said it could no longer help financially due to restrictions imposed by regulators.
Concerns about Credit Suisse have added to the already gloomy atmosphere created by the closure of Silicon Valley Bank and Signature Bank in the US.
Investors’ attention is currently focused on the actions of central banks and other regulators, which should strengthen confidence in the banking system.
The bankruptcy of US banks created a nervous movement in the stock market of financial institutions, as investors worry that a similar situation as in 2008 could be repeated. Then the collapse of Wall Street giant Lehman Brothers started the international financial crisis. The investor exodus adds to concerns about wider threats to the financial system, and the European Central Bank is understood to have reached out to its subordinate banks to inquire about engagement and cooperation with Credit Suisse. The US Treasury has also indicated that it is following the situation and is in contact with Credit Suisse’s cooperation partners.
Rapidly increasing interest rates have created difficulties for companies to make payments to banks, which in turn increases the chances of creditor losses.