Credit Suisse secures £44.5bn lifeline amid fears of global financial crisis | Economic news

Credit Suisse said it would borrow up to 50 billion Swiss francs (£44.5 billion) from the Swiss central bank to bolster its liquidity.

The bank said it was ‘taking decisive action to preemptively bolster its liquidity’ after its shares fell heightened fears of a global financial crisis.

“This additional liquidity would support Credit Suisse’s core businesses and customers as Credit Suisse takes the necessary steps to create a simpler, more focused bank built around customer needs,” he said in a statement. .

Credit Suisse, Switzerland’s second-biggest lender, is the first major global bank to receive such a lifeline since the 2008 financial crash – although central banks have extended liquidity more generally to banks amid stress on the the market, like during the coronavirus pandemic.

It came after the Swiss National Bank and the Swiss financial markets regulator promised emergency funding would be available if 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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Stocks fall as much as 30%

Credit Suisse shook markets on Wednesday by announcing that it had found “significant weaknesses” in its financial reporting processes for 2021 and 2022.

Its market value plummeted by as much as 30% after top shareholder Saudi National Bank said it would not provide any further financial aid as rules prevent it from increasing its stake above 10%, near its current position.

This caused an automatic pause in trading of Credit Suisse shares in the Swiss market and sent the shares of other European banks down – some by double digits.

Concerns about the banking sector

The FTSE lost £75bn in combined market value at Wednesday’s close after suffering its biggest drop in points 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’ve already taken the medicine” to reduce risk.

When asked if he would rule out government assistance in the future, he replied: “It’s not a topic… We are regulated. We have strong capital ratios, a very strong balance sheet We’re all on deck so it’s not a topic whatsoever.”

Swiss credit has faced several crises in recent years, from a corporate espionage scandal, losses related to the collapse of supply chain finance group Greensill Capital and the collapse of hedge fund management firm Archegos Capital.

In an annual report released on Tuesday, the bank said customer deposits had fallen by 41% (159.6 billion Swiss francs or £142 billion) at the end of last year compared to the year former.

The unrest added to concerns about the wider banking sector after Bank of Silicon Valley and Signature Bank, two midsize US companies, collapsed last week.