Credit Suisse’s shares soared 30% on Thursday after it announced it will move to shore up its finances by borrowing up to nearly $54 billion from the Swiss central bank, bolstering confidence as f ears about the banking system moved from the U.S. to Europe.
Credit Suisse shares surged Thursday after the Swiss central bank agreed to loan the bank up to 50 billion francs ($54 billion) to bolster confidence in the country’s second-biggest lender and blunt concerns about the international financial system following the collapse of two U.S. banks.
Credit Suisse announced the agreement before the Swiss stock market opened, sending shares up as much as 33% before they settled at a 25% gain, to 2.13 francs, in midday trading. That was a massive turnaround from a day earlier, when news that the bank’s biggest shareholder will not inject more money into Credit Suisse sent its shares tumbling 30%, dragging down other European banks.
European banking stocks also rose modestly Thursday.
The Swiss National Bank said Wednesday that it was prepared to back Credit Suisse because it meets the higher capital and liquidity requirements imposed on “systemically important banks,” adding that the problems that have hit some U.S. banks don’t “pose a direct risk of contagion” to Switzerland.
“You need to restore trust as quickly as possible, and that’s what the Swiss National Bank is trying to do,” Carlo Lombardini, an international banking expert at the University of Lausanne, told the BBC. “And we all know that the central bank is a lender of last resort, and it will lend money to a bank which is solvent because central banks do not lend to insolvent banks.”
Credit Suisse, which was beset by problems long before the U.S. bank failures, said Thursday that the loans from the central bank would give it time to complete a reorganization designed to create a “simpler and more focused bank.”
“These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders,” Chief Executive Ulrich Koerner said in a statement.
The banking turmoil has cast a shadow over Thursday’s meeting of the European Central Bank. Before the chaos erupted, ECB head Christine Lagarde had said it was “very likely” that the bank would make a large, half-percentage point rate increase to tackle stubbornly high inflation.
