Credit Suisse, the Swiss-based banking giant, announced on Thursday that it would take steps to bolster its finances by seeking up to $54 billion in loans from the central bank. The bank's shares had plummeted in value earlier in the week, leading to fresh fears about the stability of financial institutions, especially in the aftermath of the recent collapses of Silicon Valley Bank and Signature Bank in the US.
"Taken Medicine" to Reduce Risk
At a financial conference held in Riyadh, the chairman of Credit Suisse, Axel Lehmann, sought to defend the bank and assure the public of its stability. He stated that the bank had taken "medicine" to reduce risk and was fully capable of weathering the current storm.
When asked about the possibility of government assistance in the future, Lehmann dismissed the idea, stating that "that's not a topic...We are regulated. We have strong capital ratios, very strong balance sheet. We are all hands on deck, so that's not a topic whatsoever."
Central Bank Ready to Act
The Swiss central bank announced late on Wednesday that it would provide support to Credit Suisse if necessary, though it did not specify the nature of the support, whether in the form of cash, loans, or other assistance.
Regulators expressed confidence in the bank's ability to meet its obligations, despite the recent revelation by Credit Suisse managers that they had identified "material weaknesses" in the bank's internal controls over financial reporting since the end of last year.
Shares Rebound Slightly After Joint Statement
Shares in Credit Suisse fell by approximately 30 percent, reaching a record low of CHF 1.6 ($1.73), before recovering slightly to CHF 1.70 ($1.83) at the close of the SIX stock exchanges.
The bank's shares have declined by over 85 percent since February 2021. The joint statement from the Swiss National Bank and the Swiss Financial Markets Regulator seemed to have reassured investors, as shares rose on Wall Street.
According to Andrew Kenningham, chief European economist for Capital Economics, Credit Suisse is "not just a Swiss problem but a global one" and is a "much bigger concern for the global economy" than the mid-sized US banks that have failed recently.
As a "systemically important global bank," with over 50,000 employees and assets worth half a trillion dollars, the stability of Credit Suisse is a matter of concern not only for the Swiss economy but for the global financial system as a whole.