Troubled bank Credit Suisse and Switzerland’s financial regulators have decided to stand and fight to save the weakened financial giant.
Credit Suisse said Early Thursday Sydney time that it will borrow up to 50 billion Swiss francs ($US54 billion) from the Swiss central bank and buy back about SFr3bn of its debt, in an attempt to boost its liquidity and calm investors a day after the bank’s share price plummeted 24% to a series of record lows.
Credit Suisse would be the first major global bank to be given such a lifeline since the 2008 GFC – although central banks have extended liquidity more generally to banks during times of market stress including the coronavirus pandemic.
News of the backing saw Asian markets steady, then weaken again. European and US futures seemed to pick up.
No one seemed convinced by the news and are waiting to see if the European Central Bank lifts rates tonight.
The ASX 200 tumbled more than 110 points in the first minutes of trading Thursday after the confused and worrisome night’s trading in the US and Europe and never really recovered, even late in the session when news filtered through that Credit Suisse got the backing from the Swiss National Bank and its key financial regulator.
Curiously, gold fell in Asian trading but silver and oil rose – reversing the direction seen on Wednesday.
The deals announced by Credit Suisse and the regulators comes less than a day before the European Central Bank has to decide whether to go ahead with a widely tipped 0.50% increase in its key interest rate, or make it smaller – say 0.25%, or postpone it until markets calm and bank shares stop being pressured by nervy investors.
The Swiss National Bank had said on Wednesday it was willing to provide a liquidity backstop to Credit Suisse after the troubled lender’s shares collapsed after its largest shareholder, the Saudi National Bank, said it would not contribute to any new capital call.
The bank owns 9.9% of Credit Suisse and it clear that for the time being, the bank and the Swiss regulators have ruled out any move to recapitalise Credit Suisse through a massively discounted share issue because it would not have been able to raise enough money at these low prices.
The buyback of debt seems designed to put a support level under key debt securities in European and US markets.
Credit Suisse will make a cash tender offer in relation to ten US dollar denominated senior debt securities for an aggregate consideration of up to $US2.5 billion – as well as a separate offer to four Euro denominated senior debt securities for up to an aggregate 500 million euros (around $US525 million), the company said.
The latest steps will “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,” Credit Suisse CEO Ulrich Koerner said.
“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders.”
