The embattled Credit Suisse said it would exercise an option to borrow up to 50 billion Swiss francs ($54 billion) from the Swiss central bank to boost liquidity and tide over the current global financial crisis triggered by the collapse of Silicon Valley Bank last week and a published report about ‘material weaknesses’ in its business.
On Wednesday, the Swiss authorities assured that the 167-year-old bank met “the capital and liquidity requirements imposed on systemically important banks” and that it could access central bank liquidity if needed.
The borrowing will be made under the covered loan facility and a short-term liquidity facility, fully collateralised by high-quality assets. It also announced offers for senior debt securities for cash of up to 3 billion francs.
Trading in Credit Suisse’s stock was halted several times on Wednesday as it fell below 2 Swiss francs for the first time. It had fallen by more than 30 percent at one point and finished the day down 24 percent. The sell-off started after Saudi National Bank, one of its biggest investors with 9.9 percent stake, said it would not be able to provide any more cash due to regulatory restrictions.
Saudi National Bank Chairman Ammar Al Khudairy told Reuters that his bank was happy with Credit Suisse’s transformation plan, and added: “We cannot (put more money) because we would go above 10 percent. It’s a regulatory issue.”
In a report on Tuesday, Credit Suisse disclosed that it identified “material weaknesses” in its financial reporting. The bank said it was seeing “significantly higher withdrawals of cash deposits, non-renewal of maturing time deposits and net asset outflows at levels that substantially exceeded the rates incurred in the third quarter of 2022.”
The fourth quarter withdrawals by customers was more than 110 billion Swiss francs.
In an interview to CNN, Credit Suisse CEO Ulrich Koerner defended the bank’s liquidity basis, saying: “It is very, very strong. We fulfill and overshoot basically all regulatory requirements.”
Wall Street continued to fall on Thursday as investors sought safer havens of gold, bonds and the dollar.
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