The Credit Suisse stock jumped by over 40% in Thursday’s opening trade as the %54 billion credit line extended by the Swiss National Bank comes as a major relief.
The global financial and banking system seems to be under major stress with veteran bank Credit Suisse facing a crisis-like condition. On Wednesday, March 15, shares of Credit Suisse plunged to an all-time low falling more than 24% all the way to 2 Swiss francs ($2.17).
The ripples of the same were visible across the European banking stocks on Wednesday’s trading session. However, the Swiss National Bank has finally come to the rescue offering a $54 billion credit line to Credit Suisse. The Swiss central bank said that it will help to shore up liquidity and investor confidence.
This development came as Swiss regulators pleaded for a liquidity lifeline to Credit Suisse. Major cracks in Credit Suisse’s operations appear a week after three major banks in the US announced shutdown.
In a statement earlier on Thursday, March 16, Credit Suisse also confirmed that they would exercise the option to borrow up to 50 billion Swiss francs ($54 billion). This borrowing shall happen under a covered loan facility and a short-term liquidity facility, completely collateralized with high-quality assets.
However, Swiss authorities on Wednesday took some assurances that Credit Suisse met “the capital and liquidity requirements imposed on systemically important banks”. Having received this massive support from the Swiss central bank, the company noted:
“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”.
Credit Suisse becomes the first major global bank to get this massive lifeline ever since the 2008 financial crisis.
Credit Suisse Stock Jumps 40%
In the early trading hours of Thursday, Credit Suisse (SWX: CSGN) is up by a staggering 40% once again shooting past 2.06 CHF after a record central bank funding.
Credit Suisse shares jumped up to 40% in opening trade, as the Swiss banking giant said it will tap its central bank for 50 billion francs and launching an offer to buy beaten-up debt. pic.twitter.com/NUWXcGgFo0
— Holger Zschaepitz (@Schuldensuehner) March 16, 2023
The intervention by the Swiss central bank was a major breather since Credit Suisse’s biggest investors – Saudi National Bank – denied any further help on Wednesday, citing regulatory reasons. Speaking on the development, Damien Boey, chief equity strategist at Barrenjoey in Sydney, told Reuters:
“It does help. It removes an immediate risk. But it confronts us with another choice. The more we do this, the more we blunt monetary policy, the more we have to live with higher inflation – and what is it going to be? “Do bailouts make things better? On the one hand, you are removing a source of risk to the markets which is a clear and present danger. On the other hand we are feeding into this paradigm of monetary policy bucking within itself.”
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
