Credit Suisse to Borrow Up to $54bn from Swiss Central Bank: What Does It Mean? - Business News, Finance News, Share Market News - Market trendz

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Thursday 16 March 2023

Credit Suisse to Borrow Up to $54bn from Swiss Central Bank: What Does It Mean?

 Credit Suisse to Borrow Up to $54bn from Swiss Central Bank: What Does It Mean?

Credit Suisse, one of Switzerland's largest banks, has announced it will borrow up to 50 billion francs ($54 billion) from the Swiss National Bank to shore up its finances. The move comes after the bank reported a "material weakness" in its financial reporting controls, leading to a 24% fall in its shares on Wednesday. This has prompted fears of a wider financial crisis, and investors are now watching closely to see how the situation develops.

Credit Suisse's borrowing measures attempt to demonstrate "decisive action to strengthen the bank." Credit Suisse's CEO, Ulrich Koerner, has determined to swiftly advance towards delivering a more client-focused and simplified bank. Nevertheless, the bank has been hit by several scandals in recent years, including money laundering accusations and other problems. It suffered losses in 2021 and again in 2022, making it the worst year since the 2008 financial crisis. Credit Suisse has cautioned that it does not anticipate making a profit until 2024.

The Swiss National Bank and the Swiss Financial Market Supervisory Authority have moved to alleviate investor concerns, stating their readiness to assist Credit Suisse as required. They have assured that there are no clear indications of direct contagion risk for Swiss institutions in the current upheaval in the US banking sector. However, the Bank of England has contacted Credit Suisse and Swiss authorities to monitor the situation closely.

The collapse of Silicon Valley Bank, the country's 16th-largest bank, followed two days later by the collapse of Signature Bank, has raised concerns about the stability of the US banking sector. These fears have intensified with the recent troubles at Credit Suisse. The Stoxx Europe banking share index tumbled 7% on Wednesday, while in the US, shares in both small and large banks were hit, helping to push the Dow down almost 0.9%, while the S&P 500 fell 0.7%. The UK's FTSE 100 fell by 3.8% or 293 points - the biggest one-day drop since the early days of the pandemic in 2020.

The problems at Credit Suisse have once again raised whether this is the beginning of a global crisis or just another 'idiosyncratic' case. Investors are watching closely to see how the situation develops and whether other banks will be affected. The regulators have emphasized that strict rules apply to Swiss financial institutions to ensure their stability, and Credit Suisse meets the requirements for banks considered systemically important. However, investors remain cautious, and the situation is likely to remain volatile until there is greater clarity on the bank's future and the wider banking sector.

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