Credit Suisse accepted the offer from the Swiss central bank to help it financially hours after it made the announcement in an effort to reassure investors that it had the funds it needed to survive.
Credit Suisse said that it would take out a loan from the Swiss National Bank for up to 50 billion Swiss Francs ($53.7 billion). On Wednesday, investors sent shares in the nation’s second-largest lender down by as much as 30%.
The loan was described by the bank as “a bold measure to enhance its liquidity in advance.”
As Credit Suisse takes the required steps to establish a simpler and more focused bank oriented around client needs, the bank said in a statement that the additional liquidity will support its core businesses and clients.
Credit Suisse reported repurchasing billions of dollars of its own debt in addition to the borrowing from the central bank in order to control its liabilities and interest payment costs. The offer contains US dollar bonds worth $2.5 billion and euro bonds for €500 million ($529 million).
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One of the largest financial organizations in the world and one of just 30 that are designated as “globally systemically significant banks,” including JP Morgan Chase, Bank of America, and the Bank of China, the venerable but ailing bank was formed in 1856.
Following Credit Suisse’s response, Asian stocks recovered significantly from their lows. This was encouraged by the bank’s commitment to regaining public trust in its business practices.
The Swiss National Bank (SNB) earlier on Wednesday claimed that Credit Suisse (CS) complied with the “tight capital and liquidity criteria” placed on banks of significance to the larger financial system in a joint statement with the Swiss financial market regulator FINMA.
“The SNB will support CS with liquidity, as necessary,” they declared.
Investors in the troubled Swiss bank sold out their shares earlier in the day, sending them tumbling to a new record low after its biggest supporter appeared to rule out supplying any more cash. They were already on edge following the demise of Silicon Valley Bank in the United States last week.
The difficulties of “some banks in the USA do not pose a direct risk of contagion for the Swiss financial markets,” according to the Swiss authorities’ statement.
The statement went on to say that there are no signs that the current unrest in the US banking industry poses a direct danger of contagion for Swiss institutions.
