Credit Suisse Group AG Strengthens Liquidity Amid Global Banking Crisis
Credit Suisse Group AG, the Swiss bank whose shares tumbled Wednesday as fears about the health of global banks jumped the Atlantic Ocean, announced overnight that it had taken decisive action to strengthen its liquidity by borrowing up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank.[0] Investors responded positively to the news and the bank's stock surged 32% in opening trade.
The Swiss central bank also confirmed that it would provide liquidity to Credit Suisse “against sufficient collateral” if necessary.[0] In addition, Credit Suisse said it would buy back 3bn Swiss francs worth of its debt, as part of its move to calm investors’ nerves.[1]
The current turmoil in the banking sector has been further exacerbated by the collapse of Silicon Valley Bank, the second-largest US bank failure ever.[2] Add that to the closure of Signature Bank by regulators and the wind down of Silvergate Bank, and investors are bracing for a full-blown crisis in the sector.[3]
Neil Shearing, group chief economist at Capital Economics, noted that the problems at Credit Suisse are very different to those that brought down Silicon Valley Bank a few days ago, but serve as a reminder that as interest rates rise, vulnerabilities are lurking in the financial system.[4] He highlighted key areas to monitor, such as smaller European banks and shadow banks.[4]
0. “Credit Suisse, Snap, Adobe, UiPath, and More Stock Market Movers” Barron's, 16 Mar. 2023, https://www.barrons.com/articles/stock-market-movers-350a5c
1. “Credit Suisse shares surge after bank agrees £44bn lifeline – business live” The Guardian, 16 Mar. 2023, https://www.theguardian.com/business/live/2023/mar/16/credit-suisse-borrowing-liquidity-swiss-francs-central-bank-ecb-lagarde-jeremy-hunt-business-live
2. “Credit Suisse: A Triple Crisis Stock Crash (NYSE:CS)” Seeking Alpha, 15 Mar. 2023, https://seekingalpha.com/article/4587672-credit-suisse-triple-crisis-stock-crash
3. “Credit Suisse just the ‘tip of the iceberg' amid SVB fiasco: JPMorgan” Markets Insider, 15 Mar. 2023, https://markets.businessinsider.com/news/stocks/svb-bank-crisis-credit-suisse-jpmorgan-stock-market-outlook-contagion-2023-3
4. “Credit Suisse's $50 billion lifeline calms panic over banks” CNN, 16 Mar. 2023, https://www.cnn.com/2023/03/16/investing/credit-suisse-snb-loan-shares/index.html
