Swiss National Bank Provides Lifeline to Credit Suisse, European Bank Shares Rally
On Wednesday, Credit Suisse, Switzerland’s second-largest bank, announced it will borrow up to 50 billion Swiss francs ($53.7 billion) from the Swiss National Bank. This came after the Zurich-headquartered firm’s stock crashed as much as 30%, sending investors in a panic. The lender said it would also buy back some of its own debt, in what it called “decisive action” to strengthen its liquidity.
The Swiss National Bank declared on Thursday that they will make available liquidity to Credit Suisse, provided that they have enough collateral. Credit Suisse management said the move showed “decisive action” to strengthen the business, thanking the Swiss National Bank and the Swiss Financial Market Supervisory Authority for their support. At the start of trading, the stock of Credit Suisse experienced a 32% surge, with the Swiss banking firm announcing it would be borrowing 50 billion francs (54 billion dollars) from its central bank as well as offering to purchase debt that had been heavily devalued.
Neil Shearing, group chief economist at Capital Economics, indicates that the issues confronting Credit Suisse are distinct from those which caused Silicon Valley Bank to collapse a few days ago. He wrote in a note to clients that “the problems at Credit Suisse serve as a reminder that as interest rates rise, vulnerabilities are lurking in the financial system.”
At the beginning of trading, an index of European bank stocks rose by 3.3%, indicating a rally in bank shares. This is in response to the Swiss National Bank’s lifeline to Credit Suisse. The European Central Bank is also set to make an interest rate decision at 1.15pm GMT, which may have an effect on the stock market.
0. “Credit Suisse, First Republic, Snap, Adobe, UiPath, and More Stock Market Movers” Barron’s, 16 Mar. 2023, https://www.barrons.com/articles/stock-market-movers-350a5c
1. “Credit Suisse’s $50 billion lifeline calms panic over banks” CNN, 16 Mar. 2023, https://www.cnn.com/2023/03/16/investing/credit-suisse-snb-loan-shares/index.html
2. “‘The weakest links are cracking’: Investors consider possible Credit Suisse contagion” CNBC, 16 Mar. 2023, https://www.cnbc.com/2023/03/16/credit-suisse-investors-wary-of-contagion-amid-banking-crisis-fears.html
3. “Credit Suisse shares jump after saying it will borrow from SNB and buy back debt” MarketWatch, 16 Mar. 2023, https://www.marketwatch.com/story/credit-suisse-shares-jump-after-saying-it-will-borrow-from-snb-and-buy-back-debt-27a46b20
4. “Credit Suisse stocks recover live updates: Swiss National Bank announces support, European markets up” AS USA, 16 Mar. 2023, https://en.as.com/latest_news/credit-suisse-stocks-recover-live-updates-swiss-national-bank-announces-support-european-markets-up-n
5. “Futures Rally Evaporates as Banking Woes Linger: Markets Wrap” Yahoo News, 16 Mar. 2023, https://news.yahoo.com/bank-fears-rock-markets-traders-223116732.html