Credit Suisse gets $54 billion lifeline in bid to ease fears of global banking crisis

Banking giant Credit Suisse said Thursday it will borrow $54 billion from Switzerland’s central bank, the latest move by authorities to calm investors and ease mounting fears of a global banking crisis.

The move to shore up Switzerland’s second-largest commercial bank saw its shares soar as markets reacted well in Europe and the United States. It was a marked reversal on a day earlier, when Credit Suisse shares slumped and intensified fears of a possible run on bank deposits after the collapse of two U.S. banks last week.

“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” CEO Ulrich Koerner said in a statement that was published in the middle of the night in Zurich.

Markets responded well to the news, with futures up in London, Frankfurt and Wall Street. Bank stocks rose across the board, with Credit Suisse shares settling to a gain of around 23% after an initial rise of 30%

Trading was volatile in Asian markets, however.

“What we’ve seen overnight is the Swiss central bank saying ‘no, we will not let this get into a disorderly collapse,’” Sir John Gieve, a former deputy governor at the Bank of England, told BBC News.

The deal comes after Credit Suisse led a selloff in bank shares as its share price hit a record low Wednesday, fueling new fears about the health of global banks following the collapse of Silicon Valley Bank and Signature Bank in the U.S.

Credit Suisse’s longstanding problems were compounded when its largest investor, the Saudi National Bank, said it could not provide more financial assistance because it was wary of regulatory checks that would kick in.

On Thursday the bank’s chairman, Ammar Al Khudairy, said that the market turmoil in shares of the Swiss lender was “unwarranted.”

“If you look at how the entire banking sector has dropped, unfortunately, a lot of people were just looking for excuses,” Al Khudairy told CNBC’s Hadley Gamble. “It’s panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market,” he said.

Thursday’s Credit Suisse action is the first major international bank to be given such a lifeline since the 2008 financial crisis, and the move could raise questions over how banks will navigate rising inflation across the world. Last month, Credit Suisse reported its largest annual loss since that crisis.

Problems at the bank, founded in 1856 and one of the biggest in the world, has shifted the finance world’s gaze from the U.S. to Europe.

Silicon Valley Bank, the U.S. tech sector’s favorite lender, shut down last week, leading federal authorities to guarantee all its deposits. Two days later New York regulators shut down Signature Bank, a big lender in the cryptocurrency industry.

“The problems in Credit Suisse once more raise the question whether this is the beginning of a global crisis or just another ‘idiosyncratic’ case,'” said Andrew Kenningham of Capital Economics, a London-based economic forecaster, in a research note on Wednesday, before the Credit Suisse deal was announced.

Political leaders in countries including Australia and South Korea have sought to reassure investors that their banks are well-capitalized and not facing crisis.

While Credit Suisse has had its own issues distinct from the problems that felled SVB and Signature, analysts said higher interest rates in the U.S. and abroad have put pressure on the value of assets held by lenders around the world.

The Swiss bank, which has struggled with weak profitability in recent years, warned Tuesday that a recent stream of customers pulling their money out had slowed down but “not yet reversed.” The acknowledgment coincided with the disclosure that Credit Suisse had found “material weaknesses” in its financial reporting for 2021 and 2022.

The bank has faced one scandal after another in recent years. It was convicted in connection with a money laundering plot involving a drug ring last summer. And it has had substantial entanglements with a collapsed hedge fund and a bankrupt British lender.

Rob Wile and Reuters contributed.

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