Credit Suisse takes $54bln loan from Swiss central bank after plunge

• 

Credit Suisse said Thursday it was taking a $53.7 billion loan from the Swiss central bank in a bid to "pre-emptively strengthen its liquidity" a day after stock prices fell by a huge margin as it struggles to nip in the bud a confidence crisis.

The additional liquidity would reportedly support the bank in taking "the necessary steps to create a simpler and more focused bank built around client needs," the statement said, highlighting that the bank was also trying to buy back some $3 billion in debt.

According to Credit Suisse, the bank's borrowing measures "demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders."

This comes after Asian share prices plummeted on Thursday, prompting investors to head toward safer options, such as gold, bonds, and dollars, especially as the market braces for a crisis ahead of a European Central Bank meeting scheduled for later in the day.

The crisis in question prompted the market to reevaluate whether the European Central Bank would raise interest rates, and it was found that it is very unlikely that a 0.5% rate hike might take place after it was nearly certain the hike would take place a day earlier.

Credit Suisse not alone

Credit Suisse took action to bolster its standing a few hours after the central bank and the national financial markets regulator issued a joint statement pledging emergency funding when needed.

Wednesday saw the bank lose 30% of its stock prices after the Saudi National Bank, Credit Suisse's largest shareholder, said it could not provide more cash because of the regulator restrictions limiting its holding to below 10%.

Read next: Europe bank shares sink on concerns over US sector, Deutsche down 10%

The bank has been embroiled in various scandals throughout the years, which have cost Europe's 17th largest lender many of its customers and hefty losses in the stock market.

It also reported a loss of $7.9 billion loss for 2022, sending prices further down and causing it to end the day down by 24.5%. However, Credit Suisse is not alone, as shares in numerous big European banks plummeted on Wednesday.

Even London's blue chip index caved under the pressure, losing £75 billion ($90.5 billion), marking the FTSE 100's sharpest one-day drop since the outbreak of the Ukraine war, forcing it to close at a 3.83% loss.

SVB collapse reverberating across the world

Investors are concerned due to this taking place just days after the Silicon Valley Bank (SVB) collapsed, marking the second largest bank failure in US history.

SVB, America's 16th-largest bank, saw 60% of its shares plunging on Friday, marking one of the worst economic incidents in the US since the great market collapse of 2008 and prompting regulators to seize its assets and halt trade on its stocks in Nasdaq.

As depositors rushed to withdraw their money following the news, SVB tried to reassure its clients of its solid finances, but that did not stop over $80 billion in shares value from being slashed within 48 hours followed by a free fall of its stock values until their trade was halted.

The bank, which is one of the main lenders and a partner to technology and healthcare startups that went public in 2022 - including well-known firms - has sent the early-stage tech companies in a spiral.

The California Department of Financial Protection and Innovation (CDFPI) and the Federal Deposit Insurance Corp (FDIC) relocated SVBs assets - worth nearly $175 billion - to a newly established institution, the Deposit Insurance Bank of Santa Clara.

Furthermore, the EU banking sector is undergoing hardship after reports warned on Wednesday that systemic risks for European banks were increasing.

"In Europe, despite the reassuring words of Bruno Lemaire, the French Minister of Economy and Finance and all the finance ministers, the general slide continues on the markets, financial stocks in the lead … To reduce the very high inflation, rates must be raised, but this will hit the member states hard. Banks loaded with government bonds will suffer," financial expert and geopolitical analyst Charles Gave commented.