Credit Suisse bank secures $A82 billion lifeline
Credit Suisse says it will borrow up to $US54 billion ($A82 billion) from the Swiss central bank to shore up its liquidity and investor confidence after a slump in its shares intensified fears of a global financial crisis.
The Zurich-based bank's announcement helped reverse heavy share market losses and restored confidence in wider financial markets, which were battered on Wednesday and into Asia trade on Thursday as investors fretted about potential runs on global bank deposits.
In its statement early Thursday, Credit Suisse said it would exercise an option to borrow from the central bank up to 50 billion Swiss francs ($A82 billion).
That followed assurances from Swiss authorities on Wednesday that Credit Suisse met "the capital and liquidity requirements imposed on systemically important banks" and that it could access central bank liquidity if needed.
Credit Suisse is the first major global bank to be given an emergency lifeline since the 2008 financial crisis and its problems have raised serious doubts over whether central banks will be able to sustain their fight against inflation with aggressive interest rate hikes.
While Credit Suisse's announcement helped trim some early losses, trade was volatile and sentiment fragile.
Credit Suisse's borrowing will be made under the covered loan facility and a short-term liquidity facility, fully collateralised by high-quality assets.
It also announced offers for senior debt securities for cash of up to three billion Swiss francs ($A4.9 billion).
"This additional liquidity would support Credit Suisse's core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs," the bank said.
The 167-year-old bank's problems have shifted the focus for investors and regulators from the US to Europe, where Credit Suisse led a sell-off in bank shares after its largest investor said it could not provide more financial assistance because of regulatory constraints.
The concerns about Credit Suisse added to broader banking sector fears sparked by last week's collapse of Silicon Valley Bank (SVB) and Signature Bank, two US mid-size firms.
Investor focus is also on any action by central banks and other regulators elsewhere to restore confidence in the banking system.
SVB's demise last week, followed by that of Signature Bank two days later, sent global bank stocks on a roller-coaster ride as investors feared another Lehman Brothers moment, the Wall Street giant whose failure had triggered the global financial crisis more than a decade ago.
The investor exit for the doors raised fears of a broader threat to the financial system, and two supervisory sources told Reuters the European Central Bank had contacted banks on its watch to quiz them about their exposures to Credit Suisse.
The US Treasury also said it is monitoring the situation around Credit Suisse and is in touch with global counterparts, a Treasury representative said.
Rapid rises in interest rates have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders who are also worried about a recession.
Traders are now betting that the Federal Reserve, which just last week was expected to accelerate its interest-rate-hike campaign in the face of persistent inflation, might be forced to hit pause and even reverse course.