Swiss National Bank backs Credit Suisse with massive US$54 billion loan
Swiss bank Credit Suisse has been having a rough time lately.
The backstory: Swiss bank Credit Suisse has been having a rough time lately. Despite being around since 1856 and being part of the exclusive "global systemically important banks" club, it's been losing money in the past two years – the worst it's seen since the 2008 financial crisis. To make matters worse, its shares dropped by a whopping two-thirds last year due to customers withdrawing their funds.
More recently: Last week, things got even more chaotic when Silicon Valley Bank and Signature Bank in the US went under, causing some major anxiety in the global banking sector. Then, Credit Suisse's biggest investor, Saudi National Bank, hit a snag with some regulations and announced it could not provide any further financial aid, causing the bank's shares to plummet even further. As a result, the bank had to seek help from the Swiss central bank.
The development: Credit Suisse just secured a massive loan of 50 billion Swiss francs (US$53.7 billion) from the Swiss National Bank. The central bank had already announced that it was ready to support the firm, and this loan clearly showed that promise.
But Credit Suisse isn't just relying on loans to stay in the game. It's also taking steps to manage its liabilities by repurchasing billions of dollars worth of its own debt. This includes both US dollar and euro bonds.
"The answer is absolutely not, for many reasons," said Ammar Al Khudairyt, the chairman of the Saudi National Bank, to Bloomberg in an interview on Wednesday. "I'll cite the simplest reason, which is regulatory and statutory. We now own 9.8% of the bank – if we go above 10% all kinds of new rules kick in, whether be it by our regulator or the European regulator or the Swiss regulator."
"(The) SVB collapse is a firm- and US-specific problem, but now markets have reawakened to global banks' risks – from interest rate/duration to liquidity and credit risk – and European banks are engulfed by a confidence crisis," said Davide Oneglia, senior economist at TS Lombard to Reuters.
"My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs," said Ulrich Koerner, Credit Suisse's CEO, in a statement.
"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," said Credit Suisse said in a statement.