Credit Suisse exercised the option to borrow $53.75 billion from the Swiss National Bank. The crisis-hit bank wants to calm concerns about liquidity, a day after its shares plunged to a record low.
Credit Suisse said it was taking this step to “proactively enhance liquidity” and that the funds had been borrowed from the Swiss National Bank (SNB), which stands ready to provide liquidity to Credit Suisse “if required”. “Capital and Liquidity Requirements Imposed on Systemically Important Banks”.
In order to reduce interest charges, Credit Suisse also announced that it will launch a tender offer for debt securities with a value of approx. $3 billionincluding a ten dollar note $2.5 billion and four Eurobonds of €500 million.
Ulrich KornerThe bank’s chief executive said Credit Suisse is taking “decisive steps” as part of its strategic transformation plan to “create a simpler, more focused bank focused on customer needs.”
Credit Suisse, which has faced a host of crises, saw its stock fall to a record low on Wednesday, ending the day more than 24% in the red. Global banking stocks have been hit hard in recent days amid fears that the collapse of Silicon Valley Bank (SVB) could escalate into a larger crisis. However, most of Credit Suisse’s problems predate SVB’s collapse, including liquidity concerns sparked by a wave of customer withdrawals last year, which the bank says has “now stabilized at much lower levels”, but which “has not yet abated”. With growing concerns about the financial situation of Credit Suisse, its largest shareholder, the National Bank of Saudi Arabia, has ruled out injecting more money into the bank, including for “regulatory and legal” reasons.
Credit Suisse has been plagued by a series of scandals over the past few years. Earlier this week, the bank disclosed that it had discovered “material weaknesses” in its financial reporting processes that could lead to “inaccuracies” in financial results. The Swiss bank said its management is working on a plan to address the problem, adding that its annual report “fairly presents” its consolidated financial position over the past two years. In 2021, the bank posted a loss $1.72 billion After the bankruptcy of its partner Greensill Capital, it incurred another loss of $5.5 billion In the aftermath of the collapse of the Archegos Capital hedge fund. Last March, Credit Suisse’s handling of information about assets linked to Russian oligarchs came under scrutiny by the US House Oversight Committee. In October last year, the bank saw a wave of withdrawals from customers after rumors on social media raised concerns about its financial health. In its earnings report last month, Credit Suisse reported losses of $8 billion For 2022, its biggest annual loss since the 2008 financial crisis.
Several major European banks saw their share values plunge sharply on Wednesday as concerns mounted over the financial health of banking institutions. In Paris, shares of BNP Paribas dropped more than 10%while Société Générale finished the day at down more than 12%. It owns shares of Deutsche Bank, which is listed in Frankfurt, decreased 9.25%Santander shares fell collapsed by 7% in Madrid.
Translated article from the American magazine Forbes – Author: Siladitya Ray
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