Investment bank Credit Suisse targets $50bn loan to stabilise finances

Bisola David
Bisola David
Investment bank Credit Suisse targets $50bn loan to stabilise finances

The financially distressed Credit Suisse says it would borrow up to 50 billion francs ($54 billion; £44.5 billion) from the Swiss central bank.

According to the BBC, the lender declared that it was acting swiftly to increase its liquidity as it sought to become a simpler bank.

Following the announcement that it had discovered “weakness” in its financial reporting, shares of Credit Suisse dropped 24% on Wednesday.

Fears of an expanding financial crisis resulted from this, which caused a major sell-off on European markets.

According to Credit Suisse, the bank’s borrowing actions showed “decisive steps to strengthen the bank.

CEO of Credit Suisse, Ulrich Koerner,  said in a statement, “My team and I are resolved to move forward swiftly to offer a simpler and more focused bank structured around client demands.”

The failure of Silicon Valley Bank, the 16th-largest bank in the nation, and the failure of Signature Bank two days later revealed issues in the banking system in the US last week.

After the share price of Credit Suisse fell on Wednesday, a significant shareholder, the Saudi National Bank, announced it would stop investing in the Swiss company.

Concerns extended throughout the financial markets, causing a severe decline in all major indices.

Credit Suisse, which was established in 1856, has recently dealt with a number of crises, including accusations of money laundering and other problems.

It experienced losses in 2021 and 2022, its worst years since the 2008 financial crisis, and has warned that it does not anticipate turning a profit until 2024.

Before this week, the company’s shares had already taken a beating, with their value dropping by almost two third as a result of customers withdrawing money.

Investor worries were rekindled by the bank’s Tuesday admission of “material weaknesses” in its financial reporting controls.

Tensions grew more intense after the head of Credit Suisse’s largest shareholder, the Saudi National Bank, declared that the bank would refrain from purchasing additional shares for regulatory reasons.

Credit Suisse maintained at the time that its financial situation was unimportant. But, as other banks hurried to minimize their exposure to the company and prime ministers in Spain and France attempted to allay anxieties, shares in the lender finished Wednesday down 24%.

This comes after US regulators shut down Silicon Valley Bank on Friday, the greatest collapse of a US bank since 2008. Silicon Valley Bank specialized in lending to technology companies. The UK division of SVB was purchased by HSBC for £1.

Following the SVB failure, the New York-based Signature Bank similarly failed, with all deposits at both institutions being guaranteed by US regulators.

However, worries that other banks may experience similar problems have persisted, and this week’s trade in bank shares has been erratic.

On Wednesday, the Stoxx Europe Banking Share Index fell 7%.

In the US, shares of both small and major banks suffered, which contributed to the Dow’s down of over 0.9% and the S&P 500’s decline of 0.7%.

The largest one-day decline since the early days of the epidemic in 2020 occurred when the UK’s FTSE 100 plummeted by 3.8%, or 293 points.

“America was the origin of this banking disaster. According to head of capital markets at Germany’s Baader Bank, Robert Halver,  “people are now watching how the whole issue could possibly produce problems in Europe.

“If a bank has had even the slightest issue in the past, if significant investors say we don’t want to invest any more and don’t want to allow new money to come into this bank, then of course a tale is being told where many investors say we want to get out.”

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