Switzerland’s top monetary authority announced a massive bailout of US$54 billion to bolster liquidity lines and increase investor confidence.
After the refusal of the Saudi National Bank and political pressure to avoid a bailout, the Swiss National Bank finally announced publicly that it would send a financial aid loan to clean up the finances of Credit Suisse and thus stabilize the situation of one of the most important financial institutions in Europe.
The loan amounts to US$54 billion and is aimed at recovering the liquidity lines needed to break the speculative shock against deposits and to restore investor confidence in the stock market.
This is the first significant rescue package approved for the institution since 2008 since, even amid the critical situation generated by the pandemic in 2020, this type of measure was unnecessary.
In addition, if deemed necessary and in the event of a new generalized run, Credit Suisse can access liquidity provided by the Swiss monetary authority.
The Swiss Financial Market Supervisory Authority (FINMA) issued a joint statement with the Swiss National Bank to assert that Credit Suisse successfully meets the liquidity and capital requirements especially imposed for large institutions with “systemic importance” for the overall stability of the financial market.
“The Swiss National Bank (SNB) and the Swiss Financial Market Supervisory Authority (FINMA) report that there is no risk of direct contagion between the problems of some banks in the United States and the Swiss financial market.”
“Swiss financial institutions’ strict capital and liquidity requirements guarantee their stability,” reads the joint statement from the two institutions.
The financial market reacted quickly to the announced measures.
Credit Suisse shares soared up to 40% in the first hours of the opening hours of the day, and later the share value stabilized, accumulating a 19.5% increase compared to Wednesday.
The institution’s shares had plummeted by up to 24% during the day on Wednesday and had accumulated a powerful retraction of 49.3% since trading on February 2.
The European stock markets also recorded a rebound effect and rose by up to 1% in the first hours of Thursday’s opening, recovering slightly after yesterday’s 3% fall.
The failure of Silicon Valley Bank in the US, quickly followed by the intervention and liquidation of Signature Bank, triggered a massive migration of capital from high-risk securities to reliable assets par excellence.
In a rush to shed risk, Credit Suisse’s weak position was dramatically affected by investor expectations.
With information from Derecha Diario