Credit Suisse to borrow up to $54bn amid banking crisis fears

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The announcement came after shares in the Zurich bank lost more than a quarter of their value in a day.

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Credit Suisse will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss central bank to bolster confidence in the troubled lender amid concerns about the state of the global banking system following the collapse of Silicon Valley Bank (SVB).

Credit Suisse said on Thursday that a loan from the Swiss National Bank (SNB) will support the bank’s core business as it takes “necessary steps to create a simpler, more focused, customer-focused bank.”

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The Zurich-based lender said it would also buy back about $3 billion of its debt.

“This additional liquidity will support Credit Suisse’s core business and customers as Credit Suisse takes the necessary steps to create a simpler and more focused bank that is customer-focused,” the bank said.

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Shares of Credit Suisse soared 30 percent on Thursday after the announcement, bolstering confidence as concerns about the banking system shifted from the United States to Europe.

The announcement came after Credit Suisse shares lost more than a quarter of their value amid constant market turmoil following the collapse of SVB, the largest bank failure in the United States since 2008.

The plunge in shares came after the chairman of the National Bank of Saudi Arabia, Credit Suisse’s largest shareholder, said in a television interview on Wednesday that the lender would “absolutely not” increase its stake in the bank.

Banking turmoil marred Thursday’s European Central Bank meeting. Before the chaos erupted, ECB chief Christine Lagarde said it was “very likely” the bank would raise rates by half a percentage point to deal with persistently high inflation.

In a statement Thursday, Credit Suisse CEO Ulrich Körner said the measures “demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to benefit our customers and other stakeholders.”

“We thank SNB and FINMA [Swiss Financial Market Supervisory Authority] while we carry out our strategic transformation,” Koerner said. “My team and I are determined to move forward quickly to create a simpler, more focused, customer-focused bank.”

SNB and FINMA on Wednesday said they were ready to provide liquidity to Credit Suisse if needed, although the bank’s capital and liquidity levels are in line with regulatory requirements.

“The statement from the Swiss Central Bank was a good statement, very detailed and carefully worded, demonstrating the bank’s support and willingness to do ‘whatever it takes,'” Professor Barbara Casu of Bayes Business School told Al Jazeera.

Credit Suisse’s troubles were exacerbated by a sell-off in bank stocks in the US, Europe and Asia, fueled by the collapse of SVB and the subsequent bankruptcies of cryptocurrency-focused lenders Signature Bank and Silvergate Capital.

“More problems than expected”

Credit Suisse was in trouble long before the failure of American banks. Thursday’s announcement was the latest attempt to restore the bank’s tarnished image after a string of scandals in recent years, including hiring private detectives to spy on employees and facilitating corrupt loans in Mozambique.

In October, Credit Suisse’s share price hit an all-time low after a memo from Koerner seeking to reassure employees about the bank’s future inadvertently sparked speculation that the lender could be on the brink of collapse.

William Lee, chief economist at the Milken Institute in the US, said the Saudi decision signaled more serious problems at Credit Suisse.

“The Saudis believe that Credit Suisse may have more problems than anticipated, and their decision emphasized that investors should examine the soundness of the world’s major banks,” he told Al Jazeera.

Kasu also said that Credit Suisse is “not” an SVB.

“This is a large diversified bank. He has had problems in recent months, but the problems are more varied,” she added.

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