To stay afloat, the Swiss bank Credit Suisse borrows a maximum of 50 billion Swiss francs (more than 50 billion euros) from the central bank in the country. The bank is in big trouble. Credit Suisse’s share price fell 25 percent to a new low yesterday.
Investors are reacting positively to the central bank’s intervention this morning. Credit Suisse shares initially rose more than 40 percent on the stock exchange this morning. That rise weakened in the course of the morning. By 11 a.m., the stock was up 20 percent.
For months, customers have been walking away from the bank after various scandals. This week, the bank announced that there are errors in the annual reports for the past few years. In addition, one of the main lenders, the Saudi National Bank, said it no longer wanted to help the bank financially.
The collapse of the US Silicon Valley Bank has given investors new concerns about the state of banks in general. The problems at Credit Suisse, Switzerland’s second largest, are of particular concern.
Strengthen
To allay those concerns, Switzerland’s central bank is now stepping in with extra money for Credit Suisse, totaling up to 50 billion. To indicate how large that sum is: at the end of last year, Credit Suisse had a total of just under 550 billion on its balance sheet. The bank also buys back 3 billion of its own debt securities to reduce interest costs.
Credit Suisse said it was a “decisive action needed to strengthen Credit Suisse as we continue our strategic transformation.”
The major Saudi shareholder who caused new unrest yesterday by saying that the bank will no longer receive money, tried to calm things down in an interview with business channel CNBC. He says there is “a bit of panic” on the stock exchanges and says he was never asked to transfer extra money to the bank.
Rising rates
The unrest surrounding Credit Suisse yesterday also led to falling stock prices of major European banks. The Dutch banks ING and ABN Amro also fell in value by around 10 percent.
This morning there is some recovery and the prices of ING and ABN Amro are up by a few percent.
- Swiss government intervenes in Credit Suisse problems
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- Silicon Valley Bank bankrupt, four questions about the situation
