Thursday, March 16, 2023

Credit Suisse will borrow up to $54 billion from the Swiss National Bank once the

Credit Suisse to borrow up to $54 billion from Swiss National Bank

 ZURICH: Credit Suisse Group AG said on Thursday that it would take "decisive action" to increase its liquidity by borrowing up to 54 billion Swiss francs from the Swiss National Bank.

After the flagship Swiss lender's shares fell by as much as 30% on Wednesday, Swiss regulators pledged a liquidity lifeline to Credit Suisse in an unprecedented move by a central bank.

In a statement, Credit Suisse stated, "Credit Suisse is taking decisive action to pre-emptively strengthen its liquidity by intending to exercise its option to borrow from the Swiss National Bank (SNB) up to CHF 50 billion under a Covered Loan Facility as well as a short-term liquidity facility, which are fully collateralized by high quality assets." "Credit Suisse is taking decisive action to pre-emptively strengthen its liquidity," the statement continued.

It cited an average liquidity coverage ratio (LCR) of 144% and a Common Equity Tier 1 capital ratio of 14.1% at the end of 2022. By March 14, it stated, the latter had improved to around 150 percent.

It said, referring to the intended borrowing: As Credit Suisse takes the necessary steps to create a simpler and more focused bank based on client needs, this additional liquidity would support Credit Suisse's core businesses and clients."

Global bank stocks have been on a rollercoaster ride since Silicon Valley Bank's and Signature Bank's collapses last week in the United States.

Gary Ng, senior business analyst at Natixis Corporate and Venture Bank, said financial backers may be stressed over Silicon Valley Bank and Credit Suisse for various reasons, however both experienced the symptom of exorbitant loan costs.

"The hidden monetary pressure might arise all the more habitually ... also, it is feasible to see more dark swans in a questionable climate," he said.

The CEO of the Swiss bank, Ulrich Koerner, stated earlier in the day on Wednesday that the bank's "capital, our liquidity basis is very very strong." This prompted the lender's most recent action.

"We basically meet or exceed all regulatory requirements."

After agitated customers withdrew billions of dollars from the bank, Credit Suisse Group reported its largest annual loss since the global financial crisis of 2008. It warned that there would be another "substantial" loss this year.

The bank, Switzerland's second greatest, has started a significant upgrade of its business, reducing expenses and tasks to resuscitate its fortunes, including making a different business for its venture bank under the CS First Boston brand. In December, investors contributed 4 billion Swiss francs to the bank.

It also made announcements on Wednesday regarding cash offers of up to 3 billion francs for senior debt securities.

According to the bank, it had also accelerated cost reductions and was well on track to reduce costs by 2.5 billion francs by 2025, including 1.2 billion francs in 2023.

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