Swiss National Bank to provide $54 billion liquidity to Credit Suisse
In the wake of a nosedive in its share prices, Credit Suisse announced on Thursday that it would reportedly avail credit of up to 54 billion dollars from Switzerland’s central bank to bolster its liquidity and assuage investor fears. The move comes amid a global banking crisis set into motion by the recent collapse of the Silicon Valley Bank.
After the bank’s announcement in Zurich in the dead of the night, Credit Suisse’s shares rose by 24 percent, rolling back some of the heavy losses on stock markets incurred by the Swiss lender due to investor fears regarding banking across the world. Switzerland’s second-largest bank stated that it would avail an option of borrowing up to 50 billion Swiss francs (54 billion dollars) from the central bank.
The concerned authorities revealed that Credit Suisse fulfilled the obligatory capital and liquidity conditions and that it could access central bank funds if required.
Although its share value increased, Credit Suisse’s cost of insuring debt exposure plummeted. Five-year credit default swaps tumbled 128 basis points to 1,016 bps after scaling record highs on Wednesday.
The borrowing by Credit Suisse will be done through a covered loan facility and a short-term liquidity facility, both of which are completely collateralized by high-quality assets. Also, it disclosed offers for senior debt securities for cash worth up to 3 billion Swiss francs.
Ulrich Koerner, the company’s chief executive, promised to swiftly implement a strategy to optimise processes while advising Credit Suisse personnel in a memo to concentrate on the facts.
With a better liquidity coverage ratio and recent capital raisings, Credit Suisse will continue to concentrate on the change, according to Koerner.
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