Credit Suisse plans to borrow big

Credit Suisse has announced plans to borrow up to CHF 50 billion ($54 billion) from the Swiss National Bank to strengthen its finances. This decision comes after the bank suffered a 24% fall in shares following the discovery of “weakness” in its financial reporting. The situation led to a sell-off on European markets and raised concerns about a wider financial crisis. Credit Suisse’s CEO, Ulrich Koerner, released a statement in which he pledged to make the bank simpler and more focused on client needs.

The Swiss National Bank and the Swiss Financial Market Supervisory Authority have said they are prepared to help Credit Suisse if necessary. Swiss financial institutions must meet strict rules to ensure stability, and Credit Suisse is considered a systematically important bank. The regulators emphasised that there were no signs of direct risk for Swiss institutions due to the current turmoil in the US banking market. The Bank of England has also been in touch with Credit Suisse and Swiss authorities to monitor the situation.

Credit Suisse has faced a string of scandals in recent years, including money laundering charges and other issues. The bank lost money in 2021 and 2022, and its shares fell by roughly two-thirds last year as customers withdrew funds. The revelation of “material weakness” in its financial reporting controls prompted renewed investor concerns, which intensified when the Saudi National Bank, Credit Suisse’s largest shareholder, announced that it would not buy more shares in the bank.

The collapse of Silicon Valley Bank (SVB) on Friday and Signature Bank on Sunday intensified fears of a wider banking crisis, and bank shares have been volatile this week. The Stoxx Europe banking share index fell 7% on Wednesday. Small and large banks in the US also suffered, contributing to a fall of almost 0.9% in the Dow and a 0.7% drop in the S&P 500. The UK’s FTSE 100 fell by 3.8%, the biggest one-day drop since the early days of the pandemic in 2020. Prime ministers in Spain and France spoke out in an attempt to ease fears.

The banking crisis is seen by some as starting in the US, but there are concerns about the potential for similar problems in Europe. Robert Halver, head of capital markets at Germany’s Baader Bank, warned that any bank with past problems could face a run by investors wanting to get out.