After its shares fell, Credit Suisse said it would borrow up to $54 billion from Switzerland’s central bank to boost liquidity and investor confidence.
The bank’s announcement in the middle of the night in Zurich boosted Credit Suisse shares 24% and helped reverse some of the stock market losses caused by investor fears of global bank runs.
Since the 2008 financial crisis, Credit Suisse is the first major global bank to receive an emergency lifeline, casting doubt on central banks’ ability to fight inflation with aggressive interest rate hikes.
The second-largest Swiss bank said it would borrow up to 50 billion Swiss francs ($54 billion) from the central bank.
Swiss authorities assured Credit Suisse on Wednesday that it met “the capital and liquidity requirements imposed on systemically important banks” and could access central bank liquidity.
JP Morgan analysts said the measures will give the Swiss lender time to restructure.
“The combination of measures should be sufficient to stem the negative moves across the capital structure as the market priced in the potential impact of liquidity pressures,” JP Morgan said in a note on Thursday.
Credit Suisse debt insurance fell as its shares rose. Five-year credit default swaps fell 128 basis points to 1,016 bps from Wednesday’s record highs.
After the dramatic Swiss intervention, big bank stocks rose and insurance protection on BNP Paribas, Deutsche Bank, and UBS bonds fell. The European banking index <.SX7P) rose 2.4%.
As investors fled to gold, bonds, and the dollar, stocks fell throughout the Asian day. Credit Suisse’s announcement reduced losses, but trade and sentiment were volatile.
The head of Japan’s banking lobby said that well-capitalized Japanese banks would not be affected by a Credit Suisse crisis.
Credit Suisse will use the covered loan facility and a short-term liquidity facility, fully collateralized by high-quality assets. It offered senior debt securities for cash up to 3 billion francs.
In a memo, Credit Suisse CEO Ulrich Koerner told staff to focus on facts as he promised to swiftly streamline operations.
Koerner said Credit Suisse would continue the transformation from a position of strength, citing an improved liquidity coverage ratio and recent capital raisings.
After the latest funding, Credit Suisse Asia bankers reassured clients.
“We’ve been telling them to read the statements and look at the fact that we are buying 3 billion francs worth of bonds because they are so cheap,” said a Hong Kong-based senior banker, who declined to be named.
