As a decline in its share price heightened concerns about a global banking crisis, Credit Suisse attempted to increase its liquidity and win back market confidence on Thursday after it received up to $54 billion lifeline from Switzerland’s central bank.
After its announcement on Wednesday night in the middle of the night in Zurich, shares of Credit Suisse momentarily recovered from a 25% loss, but eventually gave up some ground and ended the day 20% higher.
After days of hefty losses due to market concerns over potential bank pressures around the world, which have also sparked calls for action from businesses in other industries, Europe’s banking index initially increased, but was down 0.3% by 1306 GMT.
Moreover, prior to Silicon Valley Bank’s (SVB) failure last week, European banks had lost over $165 billion in market value since March 8, according to data from Refinitiv.
Since the global financial crisis of 2008, Credit Suisse is the first large bank to receive an emergency lifeline, and its problems have cast considerable doubt on the ability of central banks to continue aggressive interest rate increases.
Authorities have emphasized that because banks are now better capitalized and funding, which almost instantly dried up in 2008, are more readily available, the situation is different from the global financial crisis.
One of the largest financial institutions in Europe, Allianz (ALVG.DE), stated on Thursday that, “unlike what happened during” the 2007–2008 global financial crisis, authorities were “fully positioned” to handle any liquidity problem.
The Swiss National Bank stated that it would lend liquidity to Credit Suisse in exchange for adequate collateral when the country’s second-largest bank announced it received a lifeline of 50 billion Swiss francs ($54 billion).
Following Wednesday’s assurances from Swiss authorities that Credit Suisse complied with “the capital and liquidity standards imposed on systemically important banks,” the action was taken.
However, Ulrich Koerner, the company’s chief executive, promised to swiftly implement a strategy to optimize processes while advising Credit Suisse personnel in a memo to concentrate on the facts.
