Credit Suisse crisis: Swiss lender taps central bank for emergency £35bn loan backstop

CREDIT SUISSE overnight announced it would take advantage of a 50bn franc facility offered by the Swiss National Bank after a day in which its stock price sank by 25 per cent.

The embattled Swiss lender’s tumble was triggered yesterday morning by comments from its largest shareholder, Saudi National Bank, that it would not inject further cash into the business should it come to it.

That built on fears across the world that the demise of Silicon Valley Bank last week, hit by the impact of a series of bad bets on interest rates staying low, could be a canary in the coalmine for other banks.

Late Wednesday night the Swiss National Bank (SNB) and the country’s financial regulator was forced to issue a statement which confirmed that Credit Suisse met “the capital and liquidity requirements” it needed to and that “if necessary, the SNB will provide Credit Suisse with liquidity.”

Just hours later, Credit Suisse issued their own statement, saying it would tap 39bn franc of the 50bn franc facility lined up by the central bank.

“This additional liquidity would support Credit Suisse’s core businesses and clients as Credit Suisse takes the necessary steps to create a simpler and more focused bank built around client needs,” the lender said.

It came on the same day that Blackrock boss Larry Fink asked if  the collapse of Silicon Valley Bank last week meant “the dominoes are starting to fall” as the era of easy money comes to an end.

The FTSE 100 suffered a more than 3 per cent loss, its worst in a year. Across Europe, bank stocks were battered: Commerzbank tanked nearly 9 per cent , BNP Paribas slipped 10 per cent, and SocGen fell more than 12 per cent.

“The Swiss National Bank SNB and the Swiss Financial Market Supervisory Authority FINMA assert that the problems of certain banks in the USA do not pose a direct risk of contagion for the Swiss financial markets.

A statement from the Swiss central bank and regualtor

In a sign of the fear gripping markets, economist Nouriel Roubini – nicknamed Dr Doom after predicting the late-noughties sub-prime crisis – said the “Credit Suisse crisis is a ‘Lehman moment’ for European and global markets,” and that it was “too big to fail and too big to be saved.”

The price of bets that Credit Suisse could default on its debts spiralled yesterday as other financial institutions looked to insure themselves against any further turbulence.

In his annual letter to investors, Larry Fink -the boss of the world’s biggest asset manager Blackrock – said “the dominoes are starting to fall” after an unprecedented hike in interest rates across the world.

Fink said the jumps had “exposed cracks in the financial system” and “something else had to give”.
“It does seem inevitable that some banks will now need to pull back on lending to shore up their balance sheets,” he said.

The European Central Bank is meeting today to decide whether to hike rates. It had all but announced it would hike 50 basis points, but most traders now expect a smaller rate rise of 25 basis points due to the increasingly febrile environment.